Retirement plan milestone approaching

State Street Global Advisors projects that 2012 will be the year that defined contribution plans such as 401k’s become the predominant form of retirement plan offered by employers.  SSGA estimates that 2012 will the first year that more employees will be enrolled in these defined contribution plans than are participating in company sponsored defined benefit plans, such as traditional pensions.

Historians of the future will surely look back at this as an “accidental social experiment” with far reaching implications.  Ted Benna, the retirement plan consultant credited with having “invented” the 401k (via a creative interpretation of an obscure section 401k of the tax code, which the IRS subsequently blessed) most likely never envisioned such widespread adoption.  And, report after report has been published lamenting how employees have mismanaged their accounts.  It will be interesting to see how all of this plays out over the next 50 years.

Regardless of one’s feelings on defined contribution plans (adding 403 and 457 type plans to the group), no one can deny that “they are here to stay.”   This fact highlights the need to improve the financial literacy of our population, since individuals are responsible for managing these accounts.  Our schools are being challenged to improve by meeting No Child Left Behind guidelines.  Perhaps they need to add a section entitled “No Retiree Left Behind………………..”