401(k)s and Company Stock: How Can We Encourage Diversification?
IB#9
Introduction
Over the past two decades, the private pension system in the United States has shifted from defined benefit to defined contribution plans, and the fastest growing defined contribution plans are 401(k)s. The defining characteristic of 401(k) plans is that employees, rather than employers, bear the investment risk. Currently, many employees hold a significant portion of their 401(k) funds in their companies’ stock, which increases the risk of their plans...
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The authors are both with the Center for Retirement Research at Boston College (CRR). Alicia H. Munnell is the Director of the CRR and the Peter F. Drucker Professor of Management Sciences at Boston College’s Carroll School of Management. Annika Sundén is the Associate Director for Research of the CRR.