The Ubiquity of Retirement Planning

by Saul Ewing Arnstein & Lehr LLP

Advice on retirement planning is being offered by many entities and forms of media these days. Those of us in the early baby boom generation are bombarded by offers to have dinner and listen to lectures as to how to invest retirement accounts. Financial institutions offer brochures and television advertisements on the subject, most of which seem to involve sailboats and wooden docks with smiling grandchildren. What’s going on here?

We are seeing the confluence of legislation and business and societal developments that have occurred over a period of many years. First, the baby boom generation is a large cohort within the population. At young ages, they required the building of new schools. In later years, they needed more housing. Now, as they approach retirement age, they are focused on the decisions that need to be made for retirement. There are many of us, and whatever we need or can be sold will be discussed at length in media. New products that we might need, from the basic to the embarrassing, will be prominent on television, radio and the internet.

Second, this generation appears to be wealthier than earlier generations. This isn’t true for everyone, but despite some stalling of wealth increases in recent years, more people have the ability to retire than was previously the case. There are many statistics as to the amount of wealth that will be passed on to future generations in the next thirty to fifty years, and the amounts are in many trillions of dollars.

The third factor is the enactment in 1974 of the Employee Retirement Income Security Act. ERISA established rules for the proper funding of retirement plans, fiduciary standards, reporting and disclosure requirements, and individual retirement accounts. Prior to ERISA, there was scant regulation of retirement plans and minimal funding requirements. The result was many woefully underfunded retirement systems. The best known case of this problem involved the manufacturers of Studebakers. That company maintained a pension plan, but did not fund the benefits as they were earned, nor were they required to do so by the law in effect at the time. When Studebaker decided to stop making cars in the US, and closed their plant in Indiana, many workers got either a fraction of their benefits earned or in some cases nothing at all. One worker at the plant committed suicide. A mere eleven years later, at the instance of both Republicans and Democrats, Congress passed ERISA. This new law spawned many types of service businesses to help with compliance, and provided much work for lawyers in interpreting the statute and litigating many thousands of cases on the law’s meaning and application. The result has been a far better understanding of retirement benefits, more regulation to ensure that retirement plan participants are treated fairly and within the law, and much higher levels of funded retirement benefits. ERISA and its many subsequent amending laws have been criticized for their complexity, but these laws have increased the retirement wealth of Americans substantially.

A fourth factor in the growth of discussions about retirement and retirement assets is the decline of pension plans. Pension plans are a form of defined benefit plan, which means that the employer defines the benefit to be received at retirement and then provides the funding to permit payment of those benefits. The risk that there will not be sufficient funds to pay the benefits is on the employer, so if the stock market declines and the assets in the plan are worth less, the employer must eventually make up that loss. Defined benefit pension plans were once the norm in large corporations and in government service, and they remain the dominant form of retirement benefit for government service. The problem that was perceived in defined benefit pension plans was that the unfunded portion of the plans was a liability of the employer, and could reduce its stock value. In addition, it was possible in some cases to postpone payment of funding liabilities, which simply created greater liabilities later. And there were problems when assets in the plans were not carefully invested. It became the perception that defined benefit pension plans were too great an expense to be continued, at least for the nonunion work force, and a great many of them were terminated. They remain important in government service and in unionized industries. In recent years, legislators in some states have noticed the growth in unfunded liability for government retirement plans, nearly always the result of earlier legislators postponing or forgoing needed funded for budgeting purposes, or increasing benefits as a way of garnering votes, and have called for curtailment of these types of plans, at least for new employees. A more careful analysis of such proposals sometimes shows that the replacement plan could be more expensive than the defined benefit pension plan, and provide lower benefits less efficiently. Defined benefit pension plans, if properly funded and administered, have been shown to be more efficient in delivering levels of benefits than other types of plans. But they do place a liability on the books of the state or business maintaining the plans, and that can cause concern to legislators and shareholders.

The replacement plans, and the plans in effect for most businesses, large and small, including most law firms, is the defined contribution plan. In this type of plan, the employer makes a contribution, and the employee may also make a contribution, required or voluntary. Whatever is contributed is invested and, at retirement, the employee gets whatever is in his or her account. Thus the investment risk is shifted from the employer to the employee. The employee generally has decision-making authority as to the investment of the retirement account, often choosing from mutual funds or similar investments provided as a menu by the plan administrator. A future article will discuss why this investment method has proved to be such a poor idea. In any event, participants in these plans spend much of their working life making choices as to the investment of their retirement accounts, with varying degrees of success. At retirement, many of these plan participants roll their accounts over to an individual retirement account at a bank or other financial institution. Now, they must make a decision as to how those funds will be invested. They will not receive a monthly payment from a pension plan maintained by their employer, but instead whatever amount they choose to withdraw from the rollover IRA. The choice as to where to invest the retirement funds and when to withdraw them will be for the individual to decide, a departure from the employment years, when the individual had at least the guidance of the menu of investment choices that had been offered to him or her. It is for that reason that we see so many offers made to help manage retirement funds- individuals who had some assistance, through the employer’s plan, on investing, can now choose from the universe of investment opportunities. Many of those opportunities, but not all of them, will be for skilled investment advice that will help to ensure a comfortable retirement. More freedom carries with it the chance of making more mistakes, which could affect the quality of retirement living.

This is the backdrop against which important decisions are being and will be made that will determine how people will live their retirement years. In subsequent articles, I will discuss the complex rules on minimum distribution of retirement benefits and estate planning for retirement benefits, as well as other developments in the wide-ranging field of retirement living. These involve not only financial decisions about retirement assets but also issues such as healthcare decisions in retirement, Social Security and Medicare benefits and financial planning.

(This article previously appeared in the Legal Intelligencer.)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Saul Ewing Arnstein & Lehr LLP | Attorney Advertising

Written by:

Saul Ewing Arnstein & Lehr LLP

Saul Ewing Arnstein & Lehr LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.