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With a 401k, you own the underlying assets, and a brokerage is just holding them for you. With a pension, you own a promise from the employer to pay you a fixe
by closeparen 8y ago
With a 401k, you own the underlying assets, and a brokerage is just holding them for you.
With a pension, you own a promise from the employer to pay you a fixed amount. How it does that is (theoretically) none of your concern.
Some consider pensions to be more pro-worker because you're entitled to the same payout regardless of market performance. But it seems to be turning out that the 401k is more worker-friendly, as there's no promise to be reneged.
- deogeo 8y ago> With a pension, you own a promise from the employer to pay you a fixed amount. How it does that is (theoretically) none of your concern. I'm mostly in the dark about the US pension system, so forgive me if the question is a silly one: How is this 'promise' not a legally binding debt, to be repaid as much as possible by the selling of assets during bankruptcy?
- closeparen 8y agoThey are. But in these cases, substantial repayment is not possible: a) The entity never had enough assets to begin with (public pensions). b) The assets have lost their value (business failure). c) The assets were directed elsewhere by management (private equity takeover).
- tedmiston 8y agoEven better rolling over from a 401k to an IRA where the worker truly has full control over the expenses of their retirement as well.