Improvements in communication around defined contribution plans would lead to better retirement outcomes for participants because savers need to be more engaged and active in their choices than they would under defined benefit arrangements.
One proposed change is for DC providers to focus on helping participants to understand the value of their retirement savings in terms of the income they can expect to receive once they retire rather than showing them an account balance, delegates at Pensions&Investments' WorldPensionSummit conference heard Wednesday.
"The purpose of the retirement system is an income goal, not a wealth goal," said Robert C. Merton, distinguished professor of finance at the Massachusetts Institute of Technology's Sloan School of Management, and the John and Natty McArthur University professor emeritus at Harvard University, in a presentation. "Income is something that all of us can relate to irrespective of education," he said.
Mr. Merton said individuals will receive less income from U.S. Treasury bond investments due to income volatility in the assets. There was an 87% decline in income from 10-year U.S. Treasury bonds in the past 13 years, he said.