The part where it’s defined-contribution instead of defined-benefit.
To be perfectly honest, I personally am better served with a 401(k): I’m in an above-average earning career (engineering), have lived well below my means, and am financially literate.
But most people are not like me. Frankly, the average worker in the US is either not competent or not disciplined enough to both actually contribute enough and invest it properly, and so as a nation we’re careening towards a disaster of geriatric poverty the likes of which hasn’t been seen since before Social Security was invented.
So yeah, the American working class was definitely scammed when pensions were replaced with 401(k)s. But hell, even if you don’t understand the actual differences and implications, you could also tell it’s fishy even just by the fact that the execs were so eager to switch over!
Y’know there’s this thing called Target Retirement Date ETFs right? Also, aren’t most 401ks either managed or extremely restricted towards very safe investment options?
Y’know there’s this thing called Target Retirement Date ETFs right?
Of course I do.
But a surprisingly large number of people either don’t, or don’t understand it and are terrified of making a mistake, so they end up making the much worse mistake of leaving their 401k contributions in the cash sweep account. (I think in recent years 401ks have started putting contributions in target-date funds by default instead of making people affirmatively choose it, but still, a lot of people lost a lot of years of growth to that issue alone.)
And again, that’s not even talking about the people who simply don’t [think they] make enough money to contribute at all, but would have had money going to their retirement if it had been in the form of a pension that they never had the option to decline and get in their paycheck instead. I have never heard of a 401k that forces you to put money away in order to ensure that your retirement is actually adequately funded, the way that pension plans used to handle automatically.
Perhaps but my years working for various companies that offered pensions with substantial vestment periods but which I didn’t stay at for long enough to get are wasted, because pensions usually take 10+ years to earn, whereas if I’d had 401k contributions with vestment periods usually around 1.5-5 years I’d have a decent little bit of money from those that could have grown.
Now I have the best of both worlds where I get a defined contribution of 10% on top of whatever I earn added to my 401k with just a few years to vest.
Pensions only pay out if both company and employee are a type of loyal that is simply not common anymore.
The part where it’s defined-contribution instead of defined-benefit.
To be perfectly honest, I personally am better served with a 401(k): I’m in an above-average earning career (engineering), have lived well below my means, and am financially literate.
But most people are not like me. Frankly, the average worker in the US is either not competent or not disciplined enough to both actually contribute enough and invest it properly, and so as a nation we’re careening towards a disaster of geriatric poverty the likes of which hasn’t been seen since before Social Security was invented.
So yeah, the American working class was definitely scammed when pensions were replaced with 401(k)s. But hell, even if you don’t understand the actual differences and implications, you could also tell it’s fishy even just by the fact that the execs were so eager to switch over!
Y’know there’s this thing called Target Retirement Date ETFs right? Also, aren’t most 401ks either managed or extremely restricted towards very safe investment options?
Of course I do.
But a surprisingly large number of people either don’t, or don’t understand it and are terrified of making a mistake, so they end up making the much worse mistake of leaving their 401k contributions in the cash sweep account. (I think in recent years 401ks have started putting contributions in target-date funds by default instead of making people affirmatively choose it, but still, a lot of people lost a lot of years of growth to that issue alone.)
And again, that’s not even talking about the people who simply don’t [think they] make enough money to contribute at all, but would have had money going to their retirement if it had been in the form of a pension that they never had the option to decline and get in their paycheck instead. I have never heard of a 401k that forces you to put money away in order to ensure that your retirement is actually adequately funded, the way that pension plans used to handle automatically.
Perhaps but my years working for various companies that offered pensions with substantial vestment periods but which I didn’t stay at for long enough to get are wasted, because pensions usually take 10+ years to earn, whereas if I’d had 401k contributions with vestment periods usually around 1.5-5 years I’d have a decent little bit of money from those that could have grown.
Now I have the best of both worlds where I get a defined contribution of 10% on top of whatever I earn added to my 401k with just a few years to vest.
Pensions only pay out if both company and employee are a type of loyal that is simply not common anymore.