Coming Up Short: The Challenge of 401(k) Plans [Paperback]

Alicia H. Munnell (Author), Annika Sundin (Author), Alice M. Rivlin (Editor)

Book Description

ISBN-10: 0815758979 | ISBN-13: 978-0815758976 | Publication Date: February 2005 | Edition: 2005

As the baby boom begins to withdraw from the labor force, ensuring a secure retirement income becomes an increasingly important issue, 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 Coming Up Short, two experts on retirement policy analyze 401(k) plans, the fastest-growing type of employer-sponsored pensions and a vital source of retirement income for the American middle class. Alicia Munnell and Annika 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. For employees, these plans are appealing becuase they have more control over their own retirement funds, and the plans are portable. For employers, the plans are generally less costly than defined benefit plans. Despite those advantages, there are some significant downsides to 401(k) plans. These plans shift all the risk and responsibility to employees, who must decide whether to join, how much to contribute, how to invest, whether to " cash out" when changing jobs, and how to manage their nest egg in retirement. These are difficult decisions, and while in theory 401(k)s could be an effective savings vehicle for retirement, in practice many people make mistakes at every step along the way. Coming Up Short discusses why these mistakes are made and proposes various reforms to ensure that the aging population will have adequate retirement income. Comprehensive and up-to-date, Coming Up Short is an essential resource on401(k) plans for financial service professionals, policymakers, academics, and individuals planning for their own retirement.

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. --This text refers to the Hardcover edition.

Product Details

• Paperback: 272 pages
• Publisher: Brookings Institution Press; 2005 edition (February 2005)
• Language: English
• ISBN-10: 0815758979
• ISBN-13: 978-0815758976
• Product Dimensions: 9.1 x 6.2 x 0.6 inches
• Shipping Weight: 10.4 ounces (View shipping rates and policies)
• Average Customer Review: 4.5 out of 5 stars  See all reviews (4 customer reviews)
• Amazon Best Sellers Rank: #220,168 in Books (See Top 100 in Books)

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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.