Actuary Group: Add DB Plans to 401(k)s

February 26, 2002 ( - With many Americans still clinging to an unrealistic view of their income needs in retirement, the American Academy of Actuaries called for employers to provide both a defined benefit pension and a 401(k) plan.

John Parks, Academy vice president for pension issues, said that the pension-401(k) combination should give workers a sufficient income stream while allowing them to prudently invest in order to accumulate assets.

Parks’ comments come as a survey sponsored by the Academy and the Society of Actuaries found that Americans were off base in figuring their own life expectancy and their need for possible nursing-home care.  The survey is entitled Is America Unprepared for Retirement?
Survey Results

The survey findings show that:

  • 67% of retired women and 55% of retired men underestimated how long the average 65-year-old man would live, while 54% of pre-retiree women and 46% of pre-retiree men making the same miscalculation,
  • more than 50% of pre-retirees are either “very” or “somewhat” concerned about not having enough money to pay for extended nursing care at home or in a nursing home, or to pay for good health care,
  • only a third of retirees have pondered how to be financially ready for retirement  – particularly about the possibility of needing long-term aid at home due to poor health or frailty, or the possibility of needing an extended nursing home stay,
  • both retirees and pre-retirees are pessimistic on the economy, with 63% of retirees and 60% of pre-retirees believing that it is “very” or “somewhat” likely that inflation will average more than 5% a year for the next ten years,
  • for pre-retirees, finances and health are the leading factors in deciding when to retire, with the availability of employee health insurance emerging as most important for 79% of pre-retirees

The survey was conducted in August 2001 by telephone among 600 retirees and pre-retirees. 

See the full survey.