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Pensions are known as "Defined Benefit" programs and 401(k)s are "Defined Contribution" programs. The difference is pretty much what it sounds like. If you had

Pensions are known as "Defined Benefit" programs and 401(k)s are "Defined Contribution" programs. The difference is pretty much what it sounds like. If you had a pension, you knew exactly how much money per year you'd make in retirement (the benefits were agreed to ahead of time). With a 401(k), you know how much exactly you're contributing and how much is in 'your' account, but the value of your retirement accounts in the future is dependent solely on how much you contribute and your personal investing prowess. As companies and public entities underfunded pensions over the past 40 years, pensions started going bankrupt or dramatically cutting contractually obligated benefits that were to be paid to retirees, so companies began switching to employee-owned plans. Shifting the burden of investing in retirement to the employees rather than the companies has its benefits but I think we're going to see a lot more elderly poverty as the boomers retire since on average, people are terrible at investing.

ryandrake 11y ago
Getting a bit off topic, but when we find that people's 401(k) plans are not enough to retire on, we're not going to see more elderly poverty. The elderly vote. We're going to see young taxpayers making up the difference. The move from mentions to self-directed retirement plans is essentially a wealth transfer from future workers to current corporations.
- mikeyouse 11y ago
  I think that seems optimistic. The elderly do vote, but they consistently vote for people who cut their benefits... Every single budget negotiation results in cuts to medicare and social security, which by definition are cutting benefits to the elderly. I think you're right on a macro level, the tax burden is being shifted to the younger and less politically active, but based on actual legislative action, it seems defense and social issues are more important to the elderly than retirement benefits.
ghaff 11y ago
I believe there were also regulatory changes that made the "dramatically underfunding pensions thing more difficult. (There may have been tax changes as well which drive many things.) Pensions survived in older tech companies for a long time; the company I worked for starting in 1986 had one until its acquisition in the late 1990s. But the pension was fairly modest and it also had the various other 401(k) and stock option plans.

ryandrake 11y ago

Getting a bit off topic, but when we find that people's 401(k) plans are not enough to retire on, we're not going to see more elderly poverty. The elderly vote. We're going to see young taxpayers making up the difference. The move from mentions to self-directed retirement plans is essentially a wealth transfer from future workers to current corporations.

mikeyouse 11y ago
I think that seems optimistic. The elderly do vote, but they consistently vote for people who cut their benefits... Every single budget negotiation results in cuts to medicare and social security, which by definition are cutting benefits to the elderly. I think you're right on a macro level, the tax burden is being shifted to the younger and less politically active, but based on actual legislative action, it seems defense and social issues are more important to the elderly than retirement benefits.

ghaff 11y ago

I believe there were also regulatory changes that made the "dramatically underfunding pensions thing more difficult. (There may have been tax changes as well which drive many things.) Pensions survived in older tech companies for a long time; the company I worked for starting in 1986 had one until its acquisition in the late 1990s. But the pension was fairly modest and it also had the various other 401(k) and stock option plans.