Risk Doesn't Disappear. No matter who's responsible for your retirement, the risk is still there. Turning it over to someone else doesn't make it go away. It just makes you completely dependent on them doing it right. And if they don't, you won't have many options to fix it.
So as tough as it is to save on your own, and make decisions about how to invest your money, I think you're better off taking on that responsibility. But that's just my opinion.
To give you something to think about, let's take a look at the company pension and insurance company annuity options.
Company Pension. Having your employer manage your retirement plan is no panacea. The employer has to do the same things you have to do: fund it adequately and invest it prudently. Unfortunately, they don't always do both. Company fortunes rise and fall, along with their commitments to funding your retirement. Plenty of private and public pension plans are currenlty underfunded, and have been hit hard by the recent financial meltdown with big losses.
- Over the years, we've also had numerous high profile retirement plan failures, most notably in the airline and automobile sectors. These workers thought they were guaranteed gold plated retirements. It didn't work out that way. So letting your employer have total control over your life's savings may not be such a hot idea after all.
- See my recent post on "Will Traditional Pensions Make A Comeback?" for more discussion on the topic.
- In fact, a number of major insurers almost went belly-up in this recent crisis because they got too aggressive with the guarantees they made on certain retirement income annuities.
If you're responsible for your own retirement plan, you can save as much as you want and you can invest as you see fit. If you fund it adequately and manage it prudently, you should do just fine. And you won't wake up 30 years from now surprised that someone else didn't do their job when it came to securing your retirement. That's a risk you can't control.
Bottom line. There are no easy answers to the retirement challenge. But when push comes to shove, I'd rather have control over my money. That's a valuable right, and I wouldn't be so quick to give it up.
Photo from Flickr, courtesy of BruceTurner, CC 2.0