These days, very few people get guaranteed pensions and they are almost always 401ks instead.
If you are running a business, isn’t it cheaper to provide pensions? You can invest the money in the same sort of funds that a 401k is invested in, but money not paid out (say, both retiree and spouse die) can be pocketed where 401k goes to whoever is a beneficiary like kids, extended family, charities, pets, etc).
In: Economics
Pensions rely on couple things. One a lot of population growth. You need younger workers to pay for older workers pensions. Two you need a pretty stable job market where people work for the same company for decades. Ideally you would also have a lot of big, stable companies that pay good wages and offer good benefits.
This environment existed during the period pensions thrived, but it would be hard to make it work today.
In fact I would argue even the 401k system is having problems largely for the same reasons. The population pyramid has only gotten worse and people switch jobs more now than ever before. I’m going to guess IRAs will become the focus and we might look back on 401ks as a relic just like pensions.
Latest Answers