PULSE: The Decline of Defined Benefit Plans a Detriment to Retirees

NEW YORK - March 18, 2016 - PRLog -- Russell Kamp, Managing Partner for Kamp Consulting Solutions, LLC, sat down with Asset TV to talk about some of the major concerns he has for the developing trends in the retirement investing space.   As he sees it, the biggest trend and most detrimental issue facing the US retiree is the demise of the defined benefit plan.

With defined benefit plans, an employer or sponsor provides a monthly benefit to the employee upon retirement, usually predetermined by the earnings history, length of employment, age, etc., instead of depending directly on individual investment returns.  At one point, these types of pension plans were the norm, however due to the open-ended nature of the risks involved to the employer, as well as the declining trend of workers sticking with one company throughout their careers, many companies are abandoning this plan and opting instead for defined contribution plans.

But as Russell points out, defined contribution plans are not a viable alternative.  For many, living paycheck to paycheck is the only option.  For those individuals, allocating the disposable income required to put towards retirement is simply not feasible.  Besides which, even if an individual does have the necessary income to put towards a retirement plan, more than likely they do not have the proper financial knowledge to invest it properly.  "We're asking way too much of the individual participants who are being forced into defined contribution plans with absolutely no knowledge as to how to manage those," Russell points out.  "Now you're going to ask people who have never been trained before to manage a responsibility that even some of the best investment professionals, who I've met over the years, have a difficult time managing."

To combat this growing dilemma, Russell offers the solution of preserving defined benefit plans on the state level instead of the corporate level, so that the participants in the private sector would have an alternative to the traditional 401(k) plan.  As Russell states, "Getting a monthly check as opposed to having to build a nest egg and then manage that, suits 95% of the people in this country."  In his solution, the employer would make a contribution on behalf of the employee.  That way, the contributions can be professionally managed while at the same time still provide the portability of a 401(k) plan, albeit without the loans or lump-sum distributions.

"Defined benefit plans are what we need as the backbone of our retirement industry," Russell summarizes.  "The social and economic consequences of not being able to provide that I think are pretty grave.  We're looking at generations of significant poverty if we're going to rely on individuals to handle that responsibility…I just don't see it happening."

To watch this full interview with Russell Kamp as well as other interviews with leading financial advisors, tune into Asset TV's Pulse Channel Page:  http://bit.ly/1UmLMqN

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