Discussion Board Reply – Coursework Example
Discussion board reply The posts were enlightening especially when it touched defined contribution plans (DC) where retirement benefits are guaranteed based into the contribution into the plan. This could be the response to the changing nature of retirement structure where long-term employment are already getting rarer and thus, DCs becoming in vogue because it is dependent more on the employees than the employers. The posts made me explore more on the topic and found that there are more variations to it such as the Australian superannuation system where the defined contribution (DC) that would be payable on the employees retirement is “increased by the net investment returns attributable to the employee, less tax” (Cooper, 2014) which in effect increases due to the return of investment.
This may be beneficial but it also helped realize that DC has also accompanying risk such as the risk of fund mismanagement. It was mentioned in the post that employees are likely to mismanage the funds and this was supported by the study of Burke and Goldman who found out that employees when left on their own finds it difficult to make their retirement fund secure (Burke and Goldman, 2015).
I figured that this weakness in the DC which is its susceptibility to risk and mismanagement should be addressed because it would be unthinkable for someone who worked all his or her life only to end up a pauper when one retires. DC should be reframed so that the retirement fund will be guaranteed and employees achieve their retirement income goals (Ralaoff, 2014).
Burke, T. V., & Goldman, T. A. (2015). Strategies to Help Defined Contribution Plan Participants Improve Financial Wellness and Achieve a Secure Retirement. Benefits Quarterly, 318-11.
Rafaloff, R. (2014). Why Income Should Be the Outcome of a Defined Contribution Plan. Benefits Quarterly, 30(4), 21-25.
Cooper, J. R. (2014). Are Defined Contribution Pension Plans Fit For Purpose In Retirement?. Seattle University Law Review, 37(2), 511-532.