Successful Defined Contribution Investment Design

CHAPTER 1DC Plans Today: An Overview of the Issues

PREFACE: A CAREER AND A NEW FORM OF PENSION PLAN ARE BORN

I started my career in 1981, at the age of 21 . . . which also happened to be the year 401(k) plans were launched. As a new employee at Merrill Lynch Capital Markets, I had the great fortune of working with financial professionals who immediately recognized the power of tax-deferred retirement investing. One experienced colleague told me, “If you participate in this plan, you’ll be a millionaire someday.” That’s all I needed to hear to sign up for automatic payroll deductions into my plan—a practice I have never stopped. Today, I am among the many millions of workers around the world who will fund retirement primarily with my defined contribution assets. I am very fortunate to have been advised to start saving early, and to have ignored others’ suggestions to postpone retirement savings and “enjoy being young.” I’m also lucky that I’ve had access to an employer-sponsored plan funded via automatic payroll deduction, and to have a healthy investment menu from which to choose.

In short, I’ve spent my working years with a defined contribution (DC) pension, versus the “traditional” defined benefit (DB) pension. I believe that my personal experience, as someone who started working just as 401(k) plans came into being, has helped me understand the power and importance of “getting DC right.” In 1989, I joined Hewitt Associates in Lincolnshire, Illinois, and shortly thereafter ...