Why are defined-benefit plans making a comeback and what really matters in retirement?
- Defined-benefit plans are gaining attention
- Employers may find them cost-effective
- Employees and employers sharing risks would be ideal
- Coverage is the main issue in the private sector retirement system
Defined-benefit plans are making a comeback as employers consider them a cost-effective way to provide retirement income. The current high interest rates and higher returns have improved the funded status of private-sector defined-benefit plans. However, it is important to note that employers often cut back on wages to increase retirement benefits. Additionally, employees have no protection from inflation under traditional defined-benefit plans. It would be ideal to have a system where both employees and employers share risks. The main issue in the private sector retirement system is the lack of coverage, with only half of private-sector workers participating in a retirement plan. This problem persists regardless of the type of plan, whether it’s a 401(k) or a defined-benefit plan. Those who are continuously covered by a retirement plan tend to do well, while those who are never covered rely solely on Social Security. The middle third of earners, who move in and out of coverage, often end up with inadequate retirement income. Therefore, the focus should be on improving coverage rather than solely advocating for defined-benefit plans.
Public Companies: IBM (IBM)
Private Companies:
Key People:
Factuality Level: 3
Justification: The article contains digressions, unnecessary background information, and details that are tangential to the main topic. It also includes biased statements and personal opinions presented as facts. The arguments presented are not well-supported and there are logical errors and inconsistencies throughout the article.
Noise Level: 3
Justification: The article contains some relevant information about the shift from defined-benefit plans to 401(k) plans and the potential comeback of defined-benefit plans. However, it also includes some irrelevant information about IBM’s cash balance plan and job-hopping. The article lacks scientific rigor and intellectual honesty as it does not provide evidence or data to support its claims. It also does not provide actionable insights or solutions for the reader.
Financial Relevance: No
Financial Markets Impacted: No
Presence of Extreme Event: No
Nature of Extreme Event: No
Impact Rating of the Extreme Event: No
Justification: The article does not pertain to financial topics or provide information on any extreme events.
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