Retirement and Longevity Risk: The Solution

plans do not guarantee you a lifetime income nor do you get a guarantee against losses if you selected market investment choices. Most retirement-minded people would much prefer to have a defined benefit plan that guarantees a lifetime come; however, most companies no longer sponsor such plans because they are too expensive. But, wouldn’t it be nice to have this lifetime income guarantee like your father and grandfather? You can easily create your own defined benefits plan to provide guaranteed lifetime income. Here’s how!

You are generally permitted to remove your money from an employer-sponsored retirement plan when you retire, quit, die, become disabled and maybe borrow from your money if you have a financial hardship. On rare occasion your employer will be enlightened about ERISA regulations and know about In-Service, Non-Hardship Withdrawals provisions. Such provisions, when made available by your employer, permit withdrawals regardless of age, without triggering taxes (must be trustee-to-trustee transferred), while still working and participating in the same employer’s plan. The ISNHW provisions have only recently been brought to the forefront because of litigation associated with the high fees, losses and fiduciary lapses. Ironically, many large firms have added this flexibility to their plans as a litigation-prevention device. Most small businesses have not taken action because they are unaware of the provisions and those responsible for alerting them (outside third-parties who manage the money or administer the plan for the employer) have not done so. The notice has been withheld because (a) the parties advising the small business are unaware or (b) they do not want to lose fees which are based on the amount of money in the plan. If money is withdrawn from the plan, third party fees are likely to be reduced. But, unless you can get your money out of your employer’s retirement plan, you cannot take steps to convert it into a guaranteed lifetime income. If you wait until you retire or quit to move your money, it may be too late because the market values could drop precipitously at any time. Of course, they could also rise precipitously at any time. This

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