By ERISA or Employee Retirement Income Security Act was passed in the year 1974 that allowed organizations to cease Defined Benefit Plans that they were using, and to initiate Defined Contribution Plans. Most if not all people are still not able to understand the difference between two. They firmly believe that they will be able to receive a steady and fixed amount of check as their parents were.
But things will be quite different. In defined benefit plans, the employer guaranteed a fixed monthly amount for entire remaining life of our parents. People today, if they are very lucky, can have a new type of plan called, defined contribution retirement plan. This type of plan is commonly known as ERISA 401k plan or SEP for people who are self employed. In these plans there is no such guarantee of steady and fixed monthly pay check for retiree.
With this type of plan, the individual chooses the form of investments that are bought for their retirement plan. There are various problems in this type of plan. First is that employees aren’t investors. Second problem is that, due to continuous ups and downs in stocks market conditions and other changes, the value of investment may drop dramatically leaving no worth left before individual gets retire. Third and the weird problem is when every single baby boomers reaches age or golden 70’s and start to make 401k cash out of their plans using IRS rules, the time will furnish lot more investments be put on the market for sale rather than purchased. This selling will cause value of all these stock investments to drop dramatically. Alas to say, that the law name as ERISA took each and every security from the hand of the employer and did not give any true 401k help.
However, knowledge is everything, and the information shared in this article can give little power to behave different to secure prosperous retired life. So there are many different opportunities and types of retirement plan that are do not work on the basis of stock market to achieve this goal. The darker side is that there isn’t any one for us to find such golden opportunities, not even government. We have to pay and to stay safe on our own. So take action now to secure your future.
ERISA consulting services with best knowledge of business strategies, technology and networking techniques, can help you to make these decisions.
