Abstract
Defined-contribution plans are not meeting the goal of enabling employees to save enough to retire. Improving them involves a savings component, an investment component, and a payout component. To encourage savings, employers can use behavioral strategies such as a high default savings rate and auto-escalation. The investment component should center on pre-mixed asset allocation funds built of index funds and carefully selected active funds. Payout options should include annuities, which enable the employee to convert savings to a guaranteed lifetime income as in a defined benefit plan.
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