It seems to me that the employer will fund it either way. Maybe I’m misremembering stories of pensions being mismanaged and lost. I think the most important thing is that the employer actually does something to fund a retirement, in my way of thinking the 401k approach puts me in control of the money so I don’t rely on someone else to not fail.
Whether it’s promised bonuses, stocks, or retirement funds, my motto is always “show me the money”, and I’ll believe it when it’s in my hands.
Diversity, my friend. What will you do if the 401k doesn’t come through like you want? Bear in mind that the ultra rich and the big banks employ people who are really good at investing money. They have more experience and information than you. They’ll bail themselves, but not you, out in case of disaster.
“Show me the money” is not a good motto for long term savings. Inflation or poor investment can make that money disappear easily enough. Of course you don’t want to get scammed, so oversight is a good idea.
It isn’t going to be one or the other (if they don’t offer a 401k, then you can use IRAs), unless you just make a bad choice. An employer can contribute to a 401k and also provide a pension (mine used to but I’ve been around long enough that I get both the pension and 401k with matching) but if I had a choice, I could pick a pension for example but also put money into an IRA for retirement that would normally go to a 401k.
If you absolutely had to pick one, it isn’t going to be the same answer for everyone. Amounts, what you’re able to contribute, matching, risks and tax situations are going to vary from person to person and their employer.
As far as controlling your money, some 401k’s allow some extra control, some don’t but most have a middle ground except for their company stock which you can usually directly buy. If you’re 401k allows general different ‘markets’ and/or ‘lifecycle’ buckets (they get more conservative on investment risk the closer you get to your retirement age) is, at the end of the day, all controlled by a broker and they are making the actual decision as to what to invest and how. Some plans may allow you to invest into individual stocks through the 401k’s brokerage though.
At the end of the day though, if all you had was a pension offered which you aren’t going to be contributing your income to, then you should invest in some sort of retirement plan yourself, be it an IRA, money market, bonds, CDs or whatever.
I remember there were some cases of pensions disappearing about 20 years ago so you’re not imagining it. I can’t find any stories on it but yeah there were people who went to retire their pensions were just gone.
I found this on investopia while I was looking:
“A number of situations could put your pension at risk, including underfunding, mismanagement, bankruptcy, and legal exemptions. Laws exist to protect you in such circumstances, but some laws provide better protection than others.”
So maybe they all sued the out of those companies and tapped into past insurance policies to get paid and that’s why it’s not really talked about.
Bottom line is that if someone else has your money, it’s in their control. If you have the money in your 401k, you can watch it and control it.
The old plan was that you’d have three things in retirement: Social Security, a corporate pension, and a 401k. Each of these has problems, but if any one of them fails, then the other two are still there to provide enough.
Problem is, pensions have all but disappeared, Social Security gets fucked with, and 401k’s are highly dependent on market conditions at the time you retire.
The stock portion is reduced, yes, but there’s almost always some kind of mix of stocks in the portfolio. That’s not necessarily the main issue.
First, you may not get to choose the timing. A lot of older people got trapped in the 2008 downturn. They were planning on retiring a few years out, but they lost their jobs and never got them back. Not only was their portfolio unprepared just based on when they planned to retire, but also the stock crash killed a chunk of what they had. Double wammy of losing their job and destroying their portfolio.
Second, inflation hits hard. If there’s a period of high inflation right when you retire, that can really hurt your savings regardless of how it’s distributed. One of the things those forced 2008 retirees had going for them was that we had a period of relatively low inflation for the next decade. If you took out housing (older people often own their home outright), inflation was sometimes negative.
Capitalism, even when it generally makes line go up, does so in a spiky way. Those spikes cause problems that tend to hit the working class the hardest. Sometimes in ways that cannot be recovered.
There are some liberal economists, particularly of a Modern Monetary Theory bent, who do argue for policies that would flatten growth in return for predictability. Capitalism always goes for the sugar rush of high gains, though. For example, the Fed left rates at rock bottom for far too long, thus letting the market continue extremely high gains (over 20% per year of the sp500, when 7% is a typical long term average). Likewise, you have corps chasing high profits and assuming post pandemic pent up demand would continue indefinitely. Which is now leading to layoffs while major stockholders continue to sweep it in. Both of these lead to the recent high inflation.
I think the efforts to flatten it out are doomed. Capitalism can’t solve its own problems.
