History

Starting in the 1940s, pension plans (also known as defined benefit plans) became the most common method of individual retirement planning. Pensions were a more straightforward method of planning for retirement, putting the responsibility of retirement income on the employer. These plans automatically took into consideration both the accumulation and distribution of money in retirement by having the benefit received upon retirement clearly defined in the plan. Employees knew exactly what they would recieve upon retirement. Starting in the 1980s, there was a shift to what we consider today as more conventional retirement plans like IRAs and 401(k)s (also known as defined contribution plans). Companies realized that by shifting to these alternatives to pensions, they could save money by contributing less to their employees' retirement, so they were marketed as better alternatives to pensions. This shift put the responsibility on the employee to come up with the funds for retirement. The problem with these plans is that they are focused on the accumulation of money in an account and not on how effective that money will actually be for providing a retirement income.

The accumulation of money into these accounts does not take into consideration the consequences of: (a) taxation on social security benefits in retirement, (b) the way medicare premiums are calculated in retirement, (c) uncertainties about tax policy changes, (d) uncertainties in how well the economy is performing, (e) the opportunity costs associated with liquidity constraints, and more. These consequences drastically change the distribution, and therefore, the actual experience of your retirement income. People are often misled into thinking that the high accumulation of money into conventional retirement plans will provide them with a high standard of living in retirement, when they are actually separate things. The shift into these types of plans has created a division between how prepared people think they are for retirement and how prepared they actually are for retirement.

Nader Agency's mission is to help educate people about the common misunderstandings, mistakes, and obstacles surrounding retirement planning. We believe that if people understand the shortcomings of conventional retirement plans, they can stop the unknowing and unnecessary transfer of their wealth to institutions of all kinds. This understanding will leave them better equipped to plan for and secure a more desirable future for themselves in retirement.

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We at Nader Agency know that figuring out the best way to plan for retirement is not something to be taken lightly. That's why we offer free consultations to walk you through your needs, the scope of your goals, and your budget.

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