Coming Up Short: The Challenge of 401(K) Plans [Hardcover]

Annika Sunden (Author), Alicia H. Munnell (Author)

Book Description

Publication Date: May 2004

As the ageing of America continues, the development and security of retirement income is more important than ever. The number of people over age 65 is expected to double by 2030. That trend will continue, accompanied by worries about stock market volatility, corporate malfeasance, a rapidly changing economy, and the viability of Social Security. In this book, two experts on retirement policy analyse 401(k) plans, the fastest-growing type of employer-sponsored pension and a vital source of retirement income for the American middle class. Munnell and Sunden chronicle the development of 401(k) plans, now the dominant form of private pensions. In accessible language, they explain how such plans work and discuss their popularity. There are many advantages: the plans are portable, a key consideration in this era of downsizing and mobile labour. They afford some sense of control during the investment stage. They are generally less costly for employers than defined benefit plans. And they perform well in a hot stock market. There are important downsides, however. These plans shift all the decision making to the individual, who must decide whether to join, how much to contribute, and how to invest. The employee must monitor unpredictable Wall Street, become adept at investing strategies, and balance prudence against the pressure to invest disproportionately in one's own employer. The participant also has to decide what to do with the lump-sum payment received at retirement. The authors contend that the 401(k) system must change if such plans are to provide workers with the security they need, and they offer several suggestions in that direction.

Editorial Reviews

About the Author

Alicia H. Munnell is the Peter F. Drucker Professor in Management Sciences at Boston College’s Carroll School of Management and director of the Center for Retirement Research at Boston College.

Annika Sundén is the a research associate at the Center for Retirement Research at Boston College and a senior economist at the Swedish National Social Insurance Board.

Product Details

• Hardcover: 272 pages
• Publisher: Brookings Inst Pr (May 2004)
• Language: English
• ISBN-10: 081575888X
• ISBN-13: 978-0815758884
• Product Dimensions: 9.3 x 6.4 x 0.8 inches
• Shipping Weight: 1.1 pounds
• Average Customer Review: 4.5 out of 5 stars  See all reviews (4 customer reviews)
• Amazon Best Sellers Rank: #1,180,634 in Books (See Top 100 in Books)

More About the Author

Discover books, learn about writers, read author blogs, and more.

Customer Reviews

Most Helpful Customer Reviews

3 of 3 people found the following review helpful:

4.0 out of 5 stars Where will tomorrow's money come from?, September 28, 2004

By 

Jared Gross (New York, NY) - See all my reviews
(REAL NAME)   

This review is from: Coming Up Short: The Challenge of 401(K) Plans (Hardcover)

In this concise volume, the authors first lay out a bleak assessment of the future of private retirement funding in the United States, and then provide a clear roadmap to reform with straightforward remedies that will lead to better funding and more secure futures for retirees. This is not a diatribe against 401(k) plans, but rather a clear explanation of the shortcomings both in current law and in the strategies (or lack thereof) employed by individuals in such retirement savings vehicles. A good choice for an anyone with a 401 K plan, a great choice for anyone interested in the public policy of retirement.

7 of 9 people found the following review helpful:

4.0 out of 5 stars Comes up just a little short, June 28, 2004

By A Customer

Amazon Verified Purchase

This review is from: Coming Up Short: The Challenge of 401(K) Plans (Hardcover)

The authors, currently academic economists, trace and bemoan the demise of traditional defined benefit pension plans and make the case that 401(k) plans, which have significantly supplanted the "DB plan" on the employee benefit plan menu, will not, without a number of changes, adequately take the DB plan's place in providing retirement income for an important number of today's American workers. Citing a broad range of studies and the developing literature on 401(k) plans, the book explains in a workmanlike way the legal underpinnings of 401(k) plans (accurately enough for the authors' purposes), how 401(k) plans might operate, in theory and, most importantly, how they seem to operate in practice. (I say "seem" because, as the authors point out more than once, good data is hard to come by.) There is a large gap.

That is, there is a gap between what 401(k) plans could, theoretically, provide in the way of retirement income and what it looks like they will in fact provide. Employees (and, it is fair to say, employers) don't contribute enough to 401(k) plans in the first place. Employees, who are almost invariably asked to decide how to invest their 401(k) plan accounts, don't invest wisely. (In the case of investments in "Company Stock," the employer's own stock, employees often aren't even given the chance to invest wisely.) Finally, at the end of the road, premature withdrawals and the failure to annuitize account balances means that the opportunity to maximize what there is of the 401(k) plan's retirement benefit potential is often squandered. The discussion of annuitization, that is, the conversion of a single sum account balance into a fixed stream of income for life, may be the most useful material in the book.

Although the Munnell and Sunden offer several suggestions for "reform" of the pension system ("change" would have been a more appropriate word to use here), they conclude that their real goal is "to stimulate a debate that we hope will generate other ideas and options." To the extent that the book accomplishes this purpose it will be useful. However, long on data and data analysis and short on thought provoking discussion, I'm not sure that's going to happen.

Another difficulty I have is that I uncertain who is going to read "Coming Up Short." What's the market? It is certainly not written for the typical employee who wants practical information that he or she can use in understanding and making the most of his (or her) employer's 401(k) plan. (Not that we need another book on that subject right now.) Moreover, the politicians, bureaucrats and other inside players in the employee benefit plan game -- actuaries, accountants, lawyers, consultants, record keepers and the financial industry, primarily mutual funds and insurance companies -- are already well aware of the shortcomings of 401(k) plans as retirement plans. After all, neither by law are 401(k) plans required, nor by employer choice and design (except in rare instances) are they intended, to be retirement plans. The challenge for those of us who are interested in pension or retirement income politics is to first take one step backward and to acknowledge that 401(k) plans are not retirement plans.

3 of 4 people found the following review helpful:

5.0 out of 5 stars Exploring the emergence and impact of 401(k) plans, May 13, 2005

By 

Midwest Book Review (Oregon, WI USA) - See all my reviews

This review is from: Coming Up Short: The Challenge of 401(k) Plans (Paperback)

In Coming Up Short: The Challenge Of 401(k) Plans, co-authors Alica H. Munnell and Annika Sunden collaborate in exploring the emergence and impact of 401(k) plans, the fastest-growing type of employer-sponsored pensions, with respect to the American public and national economics. Written with an especial eye toward the risks and challenges of a post-Enron scandal nation, Coming Up Short covers the special case of company stock, leakages from 401(k) plans, withdrawing from 401(k) funds at retirement, how to make pension plans do their job, and much more. Researched in-depth and filled with charts and graphs revealing its findings, Coming Up Short is a highly practical resource for not only financial service professionals, students and policymakers, but also lay individuals planning their own retirement. Highly recommended.