> That's part of what I mean. The idea that a 401K is better than a
> traditional pension plan was easier to sell because the stock market
> in general was hyped as the way to solve all your financial
> problems. It's toned down a little now I guess, but I remember a lot
> of commercials from the '90s that peddled the idea that the market
> could make anyone, if not rich, at least a lot better off.
I agree, for the most part. When they took our's away (there were fairly liberal protections for those past the halfway points towards retirement) it was first offered as an option. It went: hey young people, opt-out of the pension! Get more money now (the matching 401K offer is better) instead of planning to retire here!
Unsurprisingly, very few people choose this. Most (like me) went "I don't hate my job that much, so if I work here until I retire, that would be fine." Plus, I'm 34: I was raised to find a good job at a big company because you can work there until you retire, and you do so with a decent pension.
So then the "option" became mandatory for certain demographics because enough people didn't opt-out. Absurdly, they spun this as still better for us: us young-ins want our money NOW! instead of when we retire after a lifetime of service to the same firm. Uh, wait - didn't you just offer us this and we said "nah we'd prefer to stay here until retirement because the pension is a better deal..."?
Reality: defined-contribution requires less funding than the defined-benefit plan, which makes us more attractive to Wall Street (as we emerge from asbestos-litigation bankruptcy protection).
But they hyped it and virtually no one choose it. I think most USers want their pensions, and other than people in the financial advisor business don't believe the 401K is a better deal.
We used to have "The Rule of 90". Age + Years of Service = 90 means retire with full pension and benefits. That sounded decent to me when I started at 24 - because I could retire at 57. Now though...I'm projecting the date I am going to die, so I know what I can spend from retirement until then, depending on what I invest now within under various models of market performance.
Matt
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