Low volatility intelligent investing is the key to accumulating the necessary savings needed. Defined Benefit retirement plans are made up of actuarial assumptions and calculations to meet a defined goal of replacing 80% of your salary in retirement that may last 20 plus years.

This is different from the mainstream investing mentality that you need to get high returns and be aggressive to have enough money saved for a long retirement. With 401k, SEP, or IRA contribution limits there is simply not enough money being contributed to these types of plans to replace 80% of a high-income earner’s salary for 20 plus years in retirement.

Defined Benefit plan assumptions and calculations are based on a low to moderate rate of return on investments and are recalculated every year based on those returns and other assumptions. Each year a new range of how much can be deducted and contributed to meet the defined goal at retirement.

If investments are aggressive and have high returns, they could reduce future tax deductible amounts that can be contributed to the plan. On the other hand, if the investments lose money, they could need more contributions in future years to meet the defined benefit. It is unnecessary to target aggressive returns where you could lose money in a market decline when the government is allowing for large tax-deductible contributions that remove the need to take the excess risk.

Working with an advisor that understands how these plans work and are calculated can provide a professionally managed diversified risk portfolio that will keep you on track.