(Daily Alts) DC Plans Should Emulate DB Plan PrinciplesThe buy-and-hold, “60/40” portfolio strategy was designed for a different era. In the 1950s, an American worker had a reasonable expectation of staying with one employee for his entire career, and receiving a defined benefit (“DB”) pension upon retirement.
Obviously, times have changed, and as more DB plans are frozen or terminated, more American workers are relying on defined contribution (“DC”) plans to provide for their retirement. But since DB plans typically outperform DC plans – sometimes by as much as 1-2% a year – there is mounting evidence that DC plan participants aren’t on track to sufficiently fund their goals.
