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there is no employer matching for the defined contribution plan, the total responsibility of saving for retirement falls on the employee.
“Not only does this force the issue of saving for retirement on the employee—and at a time when statistics show that the American public is not saving adequately—it pulls the psychological rug out from under people who have traditionally relied on the good governance and discipline of the company they work for,” notes Lange.
• Employees must save as much as possible for their retirement years, starting right now. With the shift from defined benefits plans to defined contribution plans employees must learn that it is critical to fund their Roth 401(k)s (if available), 401(k)s, Roth IRAs or traditional IRAs (if eligible) and other retirement plans to the maximum. “In light of this new law, the need for an aggressively funded retirement plan has never been more apparent,” said Lange.
“A second component of the new law is that employers are pd*rmitted to educate their employees on their retirement investment options and on the risks/benefits associated with ‘being in the market,’” he added. “Of course, whether that is good news or not depends on the competence of benefits personnel. A word to the wise: make it your business to learn about the importance of asset allocation and the benefits of a well diversified portfolio.”
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