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What you're describing is "defined-benefit pension" not "pension". As the parent comment quotes, a 401k is a "defined-contribution pension".
by wutbrodo 6y ago
What you're describing is "defined-benefit pension" not "pension". As the parent comment quotes, a 401k is a "defined-contribution pension".
- StillBored 6y agoCongratulations on buying into wikipedias politically "correct" definition. How about https://www.dictionary.com/browse/pension https://www.dictionary.com/browse/pension Or maybe for clarity consider the word "pensioner" Is it still a "pension" when contributions are made your whole life and it crashes to 0 and you never make a withdraw? Most people call defined contribution plans "retirement savings" plans and defined benefit "pensions". While conceptually at a high level they are the same thing, the difference is in who bears the risk when the plan is underfunded. In the first the risk is entirely born by the individual which frequently doesn't have any choice in the investment companies much less the investments. The latter the risk is squarely on the shoulders of a larger organization, be that a company or as the last resort the government. Aka the risk is socialized/insured.
- chrisseaton 6y ago> Is it still a "pension" when contributions are made your whole life and it crashes to 0 and you never make a withdraw? Yes? Why do you think defined-benefit is so important as to be the default, gold standard which owns the name 'pension'?