Pensions versus 401k. What's the difference?

Ever wonder what happened to pensions? This week we cover the death of the pension system and how 401K accounts became so popular. Most importantly, we discuss the pros and cons of the 401K retirement system. The shift from Defined Benefit to Defined Contribution has good and bad aspects to it.
Watch the video or listen to the podcast. Below you will find show notes.
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Introduction
Overview of the drastic reduction in private sector pension availability from 1980 (83%) to 2018 (17%).
Discussion on the rise of 401(k)s as the predominant retirement funding option.
Examination of the shift from defined benefit to defined contribution retirement systems.
Impact of this shift on job stability and employee tenure.
Historical context: The passage of the Revenue Act of 1978 and the introduction of section 401(k).
Ted Benna's interpretation of the 401(k) provision and how it shaped the modern retirement savings landscape.
Discussion of the initial reception and eventual widespread adoption of 401(k) plans by U.S. companies.
Current statistics on 401(k) investments and contribution limits.
Analysis of the transformative effect of 401(k)s on retirement planning and employer-employee relationships.
Comparison between the traditional pension system and the 401(k) system in terms of employee flexibility and mobility.
Exploration of the implications of shifting financial planning responsibilities from employers to individuals.
Increased demand for financial literacy among individuals.
Ted Benna's criticism of the complexity and cost structure of post-401(k) retirement investments.
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[@rebeccaguyclawson780]

If shifting from pensions to 401k's led to more mobility in the workplace in the 80's, it's interesting to think about what a shift from employer sponsored healthcare to competent individually sponsored healthcare would do to our growing gig economy today. Would everyone quit their day job if their access to healthcare wasn't directly tied to it? What would the hidden costs be that we only would see in 40 years? Cool video

[@EconWithDrA]

That’s a great question and something we need to examine. I am glad you enjoyed the video.

[@corys4676]

Loved this one! I'm a FTE taking advantage of the full employer match. Interesting that you brought up healthcare being tied to the employer. I can't imagine a world where "healthcare/insurance" isn't the first thought when a job change happens.

[@EconWithDrA]

Thank you, Cory. I appreciate you taking the time watch and share your thoughts. Glad you liked it

[@FredSmal]

Nope! My employer does not offer 401k, but past jobs I've had were part-time. Most companies only offer 401K benefits for full time positions. Great video!

[@EconWithDrA]

That is true. One day soon, Fred

[@LukeBarbian]

I think it is an interesting topic on why healthcare is tied to employment. I have always wondered that scenario with my parents work. One of my parents has a lot more benefits than the other with their job, which always raised questions with me.

[@EconWithDrA]

I’ll have to look into how that relationship developed. Would make for a good video

[@jenialbahrani7464]

I am grateful that I can participate in my plan at TMU and I max out as well! I wish I would have started earlier!

[@EconWithDrA]

I hear you on that one

[@Kitwitwi]

Oman operates on the “Defined Benefits” system and have recently merged a number of pension funds into 2 funds - one looks after all private and public employees and other than the Armed Forces Pension fund which also has merged into it different funds covering the different forces in the country.
Whether this is going to be advantageous is a question that is still open given the deficits that the different pension funds were suffering.
Eventually I believe there will be moves to accommodate or even move to “Defined contribution” systems. We will need a lot of education to be able to do that eventually.

[@Antowan]

I just checked my 401k yesterday and it is doing well. I never really thought of all of the perks until I saw your video.