An article in the Wall Street Journal today - "Big Slide in 401(k)s Spurs Calls for Change" - discusses how significantly the financial crisis has affected some people's 401(k) retirement accounts. This kind of thing is why I hesitate to conclude, as some have, that the retirement actuarial function is becoming a thing of the past. The movement from defined benefit to defined contribution / 401(k)-type plans over the recent decades might suggest a decrease in the future demand for pension actuaries -- but concerns like those expressed in this article suggest that DC/401(k) plans may not be a panacea. The entire approach to pension/retirement continues to evolve, and I think that actuaries, with their quantitative skills, have a lot to say about risk management in a context of economic and financial volatility.
A couple of comments about this article (among the many that come to mind):
(1) It's true that individuals managing their own 401(k)s have largely lost money recently - and they may need to make better decisions and be better educated regarding their financial choices. But professional money managers have also lost money.
(2) While the whole 401(k) industry and process could probably use some tweaking (and there's plenty of research going on these days regarding some possible changes, for example to the ways alternative investment choices are presented to employees), it may be a bit rash to generally indict 401(k)s based on the current financial situation.
- Rick
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