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
Retirement consultant here.
The main reasons 401k plans have replaced pensions:
1. Employees take all of the investment risk in a 401k, employers take all of the risk in a traditional defined benefit pension
2. The amount of contributions an employer needs to make for a 401k are highly predictable, whereas pension required contributions can vary wildly
3. 401k plans tend to be less expensive for the company
4. Employees tend to prefer 401k plans, despite them often being less valuable
Combine all of these and it’s a no-brainer for companies to eliminate the pension and replace it with a 401k
Happy to expand on any of the above if you’d like.
Edited to add: regarding your question of isn’t it cheaper to provide a pension?
Answer: it depends on the plan. You can design pensions and 401k plans to be cheap or expensive. You can make a very generous 401k that costs the company way more than a bare bones pension, or you can do the opposite.
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