For most retirees, a secure and sufficient income stream during retirement is the ultimate goal. Traditionally, this is achieved through either a defined benefit (DB) or defined contribution (DC) plan, where contributions made during working years help build a retirement incom. While DB plans place the respon ibility OD institutions, such as governments or private firms, DC plans shift the burden to inctividuals. Herein lies the challenge — managing retirement funds can be daunting without financial expertise.
DB plans,whilesimple to understand,are in creasingly unsustainable,with many undcrfunda ed or in financial distTeSs. Consequently, many DB plans are converting ca DC schemes. In a DC plan, individual accumulate savings over time, which ideally would be converted at retirement into an inflation-indexed life annuity,ensuring a stable income adjusted for cost of living.
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Originally published by The Edge.