One important characteristic of the generation currently approaching retirement that distinguishes it from earlier generations is the amount of discretionary wealth controlled. Earlier generations participated more broadly in defined benefit pension plans, which provide a monthly payment but do not put the funds producing the pension benefit under the retiree’s control for investment purposes. The advent of 401(k) plans changed the retirement landscape to one in which retirement assets are in the form of accounts, as contrasted to a monthly payment. While employees are still working, they typically choose investments from a menu supplied by the plan sponsor, which offers some guidance and limitation on the investment of retirement funds. Bad decisions can still be made, but there remains a sort of safety net of investment choices.

A problem arises, however, when employees retire. Many of them will transfer their retirement accounts to individual retirement accounts. Of the group that does so, many will have their own financial advisers. Others will not, and will either look for a financial adviser or attempt to manage the funds without an adviser. The very large amount of investment funds “up for grabs” explains the constant television commercials, letters and advertisements offering assistance. Most of the people offering assistance will be reputable, but not all of them. And some who are reputable might not be competent. And this is the challenge to the viability of retirement: Whatever care has been taken in accumulating retirement funds can be quickly undone by bad, or even fraudulent, investment advice.

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