world flags at Davos Switzerland Flags of the world at the World Economic Forum inSwitzerland; the WEF recently published a white paper on retirementsystems. (Photo: Shutterstock)

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Life expectancy may be responsible for some of the strain onretirement systems globally. But it's by nomeans the only problem in the system—and the problem will getlarger as the years pass.

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This is among the findings in the 2019 white paper “Investing in (and for) Our Future,” from theWorld Economic Forum's Retirement InvestmentSystems Reform project, which also highlights the need forinclusivity and sustainability in retirement plans as necessary toprotect workers in times to come.

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According to the report, the decline of government-provided anddefined benefit plans will compel workers to amass more assets inindividual retirement savings accounts as well as to manage thoseassets “effectively” throughout their retirement.

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But when people have little or no access to retirement plans, aswell as little education in just how to accrue and manage thoseassets, that can be a tall order.

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The report suggests that policymakers and plan sponsors shouldconsider two factors in the evaluation of accumulation parametersin defined contribution plans:

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First, they should “[c]onsider risk from the perspective of anindividual saving for retirement,” and second, they should“[d]iversify the investment of saving accounts, by geography andasset type.”

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Introducing alternative asset classes can be tough, though,because of “greater complexity of the underlying investment, lowerliquidity (at both the individual and plan level), a vulnerabilityto corporate transactions if the plan is employer-based, andpotentially higher and more complex fees,” it warns, adding thatthe investment industry needs to step up and be more innovative “tomeet the demands of the DC savings market.”

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Decumulation also needs attention, and while the methods ofwithdrawing retirement assets from accounts varies widely fromcountry to country, personal circumstances of retirees need to betaken into account, since their needs can be considerably morecomplex than they might be when people are younger.

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Public policies need to include a focus on adequacy,sustainability and flexibility in order for retirees to have a goodretirement outcome. This could include creation of defaultdecumulation structures that would work much as defaultaccumulation structures do as people save for retirement.

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And last but far from least is the need for better education andeven professional advice.

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READ MORE:

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Gulf in retirement preparedness mirrors gulf inbehaviors

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Race, ethnicity play huge role in retirementpreparedness

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5 retirement preparedness numbers foremployers

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Marlene Satter

Marlene Y. Satter has worked in and written about the financial industry for decades.