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Risk participation and asset allocation in DB/DC plans
Chris Anast
Senior Retirement Strategist
Jay Binstock
Client Solutions Strategist
Naomi Fink
Retirement Economist

 


Asset allocation can greatly influence investors’ participation in defined contribution (DC) plans, depending on their risk tolerance. This finding has important implications for participants who have access to both a defined benefit (DB) and a DC plan.

 


Key takeaways:

  • We show that the riskier the default option, the greater the likelihood that more risk-averse investors may opt out.

  • In determining the appropriate market exposure within a retirement portfolio, one should consider not only risk tolerance but also the presence of other income streams within retirement.  

  • Because DB plans provide a dependable stream of retirement income, DB participants may be able to afford taking on more risk in their DC portfolios, all else being equal. 

  • A default investment option should appeal broadly to a plan’s participant base and offer benefits to those who remain in plan until, and sometimes through, retirement.

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Chris Anast is a senior retirement strategist with 25 years of industry experience (as of 12/31/2023). He holds a bachelor's degree in finance from the University of Florida and holds the Chartered Financial Analyst® designation.

Jay Binstock is a client solutions strategist with 13 years of industry experience (as of 12/31/2021). He holds a bachelor’s degree in business administration, finance from the University of Southern California.

Naomi Fink is a retirement economist with 23 years of industry experience (as of 12/31/2021). She holds a master’s degree from Barcelona GSE.

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