401Ks are a disaster: Column

[FreeJoe]

211. It's the same amount

"You can NEVER save enough..."

You do realize that you have to save the same amount whether you do it through a defined benefit pension plan or a defined contribution plan, don't you? I have both where I work. My budget for my staff includes their total compensation. That's their salary, 401K matches, and pension contributions. For one of them to retire at a particular income level, the same amount of money needs to be set aside whether it is done through a defined contribution plan or a defined benefit plan. Either way, the money set aside is money that the employee earned.

The exploitation came when companies switched people to 401Ks and lowered the amount they paid for retirement. People took a big pay cut with many of them not realizing it. If the company was fulling funding their pension and instead started giving them the money in a 401K and if the employee didn't spend any of that money, they would not be significantly worse off. Well, they would be potentially worse off in that the risk of their investments under-performing would be transferred to them, but they would also get the gains if those investments over-performed.