It's been hard enough teaching people how to save for their retirement. It could be even more difficult to teach them how to spend that nest egg.
As the multi-trillion dollar 401(k) industry becomes the predominant way that many Americans finance their golden years, millions of retirees are going to have to make big, complex decisions about what to do with that wad of cash they've accumulated. That's particularly difficult since most people don't know how long they're going to live, or what kind of health expenses they might encounter later in life.
"(When) we look at sort of the big open questions about how well 401(k) plans are going to do, first there's a question of, 'Can we get people to save enough?'" said Richard Johnson, director of the program on retirement policy at the Urban Institute think tank. "Then the other big question that is just now starting to get more attention is, 'How are people going to withdraw their funds?'"
The prospect of managing a pile of accumulated cash requires a lot more savvy than just receiving a monthly pension payment or Social Security check, and experts say it's not clear how many people will have those skills.
When David Blanchett, head of retirement research for Morningstar Investment Management, hears the informal estimate that 10,000 people are expected to retire every day over the next 20 years, he can't help but think of how ill-prepared many of those people are to handle their retirement savings.
"I hate the thought of 10,000 new portfolio managers every day," he said.
Blanchett said many of those people won't have enough money to afford a financial advisor who could help come up with individualized plans to stretch their retirement dollars. Instead, he expects that the financial services industry will see another opportunity to grow their business by coming up with managed products that offer people a more generalized plan for drawing down their retirement funds.
Retirees will have to take some initiative to figure out whether these plans are worthwhile and cost-effective, though. And Blanchett expects that retirees will have to spend some time fending off bad apples who try to persuade them to make risky choices with those big bank balances.