The Retirement Plan Solution: The Reinvention of Defined Contribution

Part II. Opportunities in the Accumulation Phase

In Chapter 1 we explained that defined contribution (DC) version 2.0 has taken over as the main vehicle for employment-based retirement saving. We identified some of the hurdles it needs to rise above if it is to succeed in creating adequate retirement incomes. Because of the increased importance of DC, addressing these issues is now a matter of broad public interest.

In the four chapters that follow, we will look more closely at ways in which the current system—which has catered up until now more to the needs of the informed few rather than to the needs of the broader population—falls short in this new role. These chapters will look at the preretirement period: the accumulation phase of DC. We will return to the postretirement decumulation phase in Part Five. So we address this part to readers who are interested in making the current DC system more effective: plan sponsors, consultants, and opinion leaders.

As anyone who has ever read a self-help book knows, shortcomings are really opportunities. And in the case of the DC system, the issues that we will address in these four chapters are indeed opportunities for change. The issues, by and large, are well known. So, too, are the routes to solutions—solutions that are needed if version 2.0 of the DC system is to become fully formed. Some of the routes have been embarked upon, others not yet.

We have divided this analysis of opportunities during the accumulation phase into four sets: