So the employer, by investing more aggressively, can realize a gain that represents the spread between what the employees stipulate and what the sponsor actually does. The only downside to this scenario is that the plan sponsor is obligated to provide employees with an investment return that s consistent with their election. In other words, the employer takes the risk and reaps the reward. The name of the game with retirement planning isn t to get rich. The goal is to not be poor.
Poverty is a real possibility for retirees.
Some people may indeed be able to manage their retirement fund and do better than if they were to receive a pension, but they re not in the majority. And even these people may not be thinking about what can go wrong in the short term. Even if the stock market is generally buoyant, not everybody will enjoy good returns. There s no doubt that some people, perhaps many, will get significantly below-average results. Then there s the uncertainty about life expectancy.