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Beyond 401(k): Program will take a peek at new pension model

(page 2 of 2)

Living longer

Watson notes that the Obama administration has been working to find ways, without doing any harm to the current system, to allow individuals to craft more prudent retirement plans and try to plan for the possibility of living to a very old age while still relying on retirement income.

“I think the main point I’ll be making during the discussion is that business owners should think about whether the owner and the employees should have the plan set up to facilitate their longevity planning,” said Watson. “If you have a high-turnover business, if a typical employee is in your plan for two or three years, and if few people make 401(k) contributions anyway, there may be some businesses where those types of considerations don’t really match the expectations or even tolerance of the employees.

“But there will be other companies where a high percentage of the employees make careers with the employer and are in the plan for a long time and make significant contributions such that it may be appropriate to have the plan be set up to help them with longevity planning, and in a company like that, the business owners will want to be thinking about what kinds of options they might want to offer.”

Those options, says Watson, are beginning to change, prompted in part by the federal government.

“Do they want to offer annuities as an investment vehicle, do they want to offer annuities as a distribution mechanism? Do they want to offer this new kind of longevity planning annuity that would allow people to defer part of their account until they begin receiving it at age 85, and if so, they need to have the plan set up to do that.

“Now typically that kind of planning goes along with planning during the accumulation phase — the time when people are contributing. And, of course, the Department of Labor has really been trying to get plans set up to give employees investment advice and so forth so they do prudent planning for their investments as they go along.”

For more information on Watson’s presentation, click here.

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