Zena Buser, Pat Robbins, Brent King

(Adams State University, Alamosa CO 81101, USA)

 

 

Abstract: As it is easy to perceive movements of the Dow Jones Industrial Average (DJIA) to be greater in magnitude and frequency, and with more people anticipating adequate retirement income from a defined contribution (DC) or 401(k) plan, it is economically important that we consider the potential for the stock market to impact all of us. DC pension plans began in the 1980s as a supplement to other sources of retirement income, but have become the predominant vehicle used to provide for a suitable standard of living in retirement for the majority of the US workforce. The increased volatility as described in the indices considered may be positive if the continued direction is up, but could mean disaster if the direction changes course. As retirement funding for a majority of the workforce is attached to the stock market via DC or 401(k) plans, it is in everyone’s interest for the numbers to keep progressing positively. However, with the more recent 2008 experience and stubborn rates of unemployment, we must all consider the future of economic growth as a source of stability.

 

 

Key words: retirement plans; pension plans; 401(k) plans; volatility; retirement funding

 

JEL codes: G1, E2, E6