401Ks are superior to Defined Benefit Pensions?

[mathjak107]

retirement planning has typically planned around the worst case scenario's with the expectations that anything better will just better our chances .

life is filled with emergency's and unexpected expenses from left field . but worst case scenario planning is not limited to just portfolio's . you may want to include caring for aging parents or the fact that while you may plan on working part time , what if you can't .

in the end the plan ends up being dynamic regardless as we tend to alter things with the big picture .

[SportyandMisty]

Corporations -- indeed most organizations -- are founded, grow, mature, become sclerotic and bureaucratic, and ultimately die.



The time from birth to death used to span many, many decades. Now, many companies go through the lifecycle in a very short time. This has a profound impact on the viability of defined benefit pensions.

What do Atari, Netscape, Palm, AOL, Apple Computer, Sony, Gateway, Compaq, RealNetworks, DEC, Silicon Graphics, Cray and and countless others have in common?

They went from birth to prominence quickly, and then they also declined quickly -- either to death or to irrelevance (Apple Computer, teetering on bankruptcy, was saved in a last minute hail mary when Steve Jobs returned and secured funding from Microsoft)

The idea of most corporations existing for centuries isn't particularly realistic. The idea of working for the same corporation for an entire career isn't particularly realistic either. The idea of the private sector pension as currently defined and implemented isn't particularly sustainable in the long run either.

Written a decade ago, Roger Lowenstein was prescient in describing the genesis of the problems with defined benefit pensions in his classic While America Aged: How Pension Debts Ruined General Motors, Stopped the NYC Subways, Bankrupted San Diego, and Loom as the Next Financial Crisis

There was a time generations ago when, if "Bob" changed employers every 3-5 years, people would whisper "What's wrong with Bob? Why can't he keep a job?"

Nowadays, if "Bob" DOESN'T change employers every 3-5 years, people whisper "What's wrong with Bob? Why can't he find a new job?"

In the modern economy, young employees need the freedom to pursue multiple careers and job types during their working lives. They need the economic freedom to switch. Pensions are not particularly conducive to that.