Chapter 13

Pension and insurance

For many individuals their investing lives are dominated less by issues relating to their rational portfolio, but rather by the options and choices with regard to pensions, life annuities and related products. Wearing the rational portfolio hat, here are some thoughts on these topics.

Defined contribution pension plans

Defined contribution plans have increasingly become the main option for employees at private companies. Instead of offering defined benefit plans or final salary schemes where the companies underwrite the risk that there is a shortfall in the size of the pension assets, companies now let pension plan participants take the investment risk.

Does it make sense to participate in a pension plan? ...

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