The decrease in defined benefit (DB) pension plans and the rise in defined contribution (DC) plans is creating increasing risk among employees regarding their retirement benefits. According to a recent Conference Board report, it’s unclear whether employer programs will be able to support employees in retirement.Executives who attended the conference indicated that as more companies discontinue their DB plans, they’ll need to change their retirement programs so they work more effectively for employees. However, this presents two risks. First, employees will outlive their retirement income and experience a considerable decline in their standard of living. The reason? Many employees underestimate how long they’ll live and overestimate how much money they can take from their savings.Second, employees are investing more than they should in equities. Even though a number of employers are using target-fund dates, some experts believe these funds are too risky for the average employee.So what’s the solution to alleviate risk? One option is phased retirement. In a survey taken during a recent Conference Board webcast, 59 of 69 respondents said they are likely to have a phased retirement program within three years. In fact, seven out of 10 people surveyed for this report indicated that they want to continue working in retirement, said Anna Rappaport, senior fellow on pensions and retirement for The Conference Board and an author of the report.Another option is to create solutions that provide lifetime income, such as inexpensive, flexible annuities. Although most individuals don’t choose annuities, the report stresses the importance of lifetime income. However, policy options and employee/employer legal requirements will need to be considered.

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