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When I retire I will have 2 tiny pensions from past employers so the bulk of my retirement will be 401k.
I think that people that are older with pensions have smallish 401k's so you might not have the same perspective that someone who has been putting money into it with a match since they were 22.
*shrug* a 50k/year pension is great but a >1mil 401k balance can produce the same income.
Plus your heirs will get them if you don't deplete them, with pension heirs get nothing.
You can even use your 401k to create your own pension like buy immediate annuities. More flexible. But people who are not comfortable with financial tools prefer pension. Simpler.
ask how many people actually save and save adequately... that's why they don't like 401k, they don't want to save on their own
it really doesn't matter for any other reasons, them saying they don't get paid enough, etc. even making $100kk, 200k, 500k, people can always spend more than they make.
*shrug* a 50k/year pension is great but a >1mil 401k balance can produce the same income.
How many people have the income to self fund a million dollar 401k? With a defined benefit pension both the employer and the employee contribute allowing lower income people to retire with a guaranteed benefit. There are very few lower income people who could self fund a 401k to the extent that it would replace a defined benefit pension. As a result they will probably end up relying on taxpayer provide social programs to augment a meager Social Security check.
How many people have the income to self fund a million dollar 401k? With a defined benefit pension both the employer and the employee contribute allowing lower income people to retire with a guaranteed benefit. There are very few lower income people who could self fund a 401k to the extent that it would replace a defined benefit pension. As a result they will probably end up relying on taxpayer provide social programs to augment a meager Social Security check.
401k also get employer match
what low income person is getting a $50k/year pension? pensions today are a % of the salary... a low income person would have a low pension $
How many people have the income to self fund a million dollar 401k? With a defined benefit pension both the employer and the employee contribute allowing lower income people to retire with a guaranteed benefit. There are very few lower income people who could self fund a 401k to the extent that it would replace a defined benefit pension. As a result they will probably end up relying on taxpayer provide social programs to augment a meager Social Security check.
Most employers have a 401k match and thus also contribute.
In the example provided with a 50k pension the retirement level income would have to typically be around 75k near the end of employment. (Talking typical, not any of the rare politically devised "super pensions")
Starting salary 30k at age 22, put in 6% + 6% employer match.
Salary goes up 2.5% a year, long term stock return 401k at 7.5%
Age 60 salary is 76k and you have about 1mil in your 401k.
We could quibble about assumptions but someone at a wage level that would garner a 50k pension should be able to amass 1mil in their 401k through steady investment by around the same age that they could start drawing their db pension.
As for "lower income people" I'd be happy to discuss an actual example with you but I'm generally talking about people working at a level where they'd historically have been provided a db pension.
A good pension is better than a 401k, a bad one is not. The best plan would be what Australia has- a superannuation plan. The employer puts in 9% and you can add to it but you get that 9% automatically. You control the investments.
A 401k with a full match can be better than a pension in cases where you are really knowledgeable about investing. However few people are, and since the plan is optional most people either don't put in or don't put in enough then they get screwed when retirement comes around.
A good pension is better than a 401k, a bad one is not. The best plan would be what Australia has- a superannuation plan. The employer puts in 9% and you can add to it but you get that 9% automatically. You control the investments.
if you control it, how is it not a 401k with 9% employer contribution?
A 401k with a full match can be better than a pension in cases where you are really knowledgeable about investing. However few people are, and since the plan is optional most people either don't put in or don't put in enough then they get screwed when retirement comes around.
most people use a target date fund if they aren't knowledgeable... it's the people who think they can do better on their own that go picking and choosing
Plus your heirs will get them if you don't deplete them, with pension heirs get nothing.
You can even use your 401k to create your own pension like buy immediate annuities. More flexible. But people who are not comfortable with financial tools prefer pension. Simpler.
Yep, I am at the somewhat extreme end of 401k savings due to a number of factors and I'm on pace to have maybe income replacement, inflation indexed and never touch my 401k principal.
As for pensions, if they are a government pension in a place where you can't really get laid off around age 50 then that's a completely different animal than say having a pension at a private company where it can run into funding issues or you can get laid off 30 years into your career when the calculation is really starting to benefit you.
I've just personally seen so many people IRL get utterly hosed by their pensions that I'd rather not take that risk.
Most employers have a 401k match and thus also contribute.
In the example provided with a 50k pension the retirement level income would have to typically be around 75k near the end of employment. (Talking typical, not any of the rare politically devised "super pensions")
Starting salary 30k at age 22, put in 6% + 6% employer match.
Salary goes up 2.5% a year, long term stock return 401k at 7.5%
Age 60 salary is 76k and you have about 1mil in your 401k.
We could quibble about assumptions but someone at a wage level that would garner a 50k pension should be able to amass 1mil in their 401k through steady investment by around the same age that they could start drawing their db pension.
As for "lower income people" I'd be happy to discuss an actual example with you but I'm generally talking about people working at a level where they'd historically have been provided a db pension.
There are many retired people who never saw a 6% match of 100%
The places that did match matched only 50% of your 6% and every time profits for the company slowed, suspended the match entirely for awhile.
I'm quite sure I am not the only retired person who never saw close to a 100% match of the 6%
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