Wednesday, December 3, 2014

The State of the American Retirement

Isn't it just like a teacher to give you an assignment about retirement before you have even started working?  I understand this subject may seem remote to you at age 17, but retirement system in America is a major component of our economy as well as a component of our social contract.  And that contract HAS changed over the past decades.  While Social Security still exists to replace some worker income in retirement, the corporate pensions plan one thought of a standard perk for a long and dedicated career, has gone the way of the dodo.  Read the three links below.  The first is an introduction to the situation that describes the contrast between defined benefit (pension) and defined contribution ( 401k) plans that currently make up the bulk of most America's retirement funds.  The other two links are to articles arguing, in on case, for pensions and for 401ks in the other.


You blog post should respond to some of these issues:


1.  What is the difference between pensions and 401k's?
2.  Where did the 401k model come from?
3.  When did the shift from pension to 401k occur and why?
4.  Are Americans  better off with a 401k of pension?  explain.
5.  Are most American's prepared for retirement?  Explain.
6.  What should young workers be doing to prepare for retirement?  And when?
7.  Do you think the current retirement scheme will provide security for you, your parents? 
8.  What do you think we should have in place as a retirement system?
9.  Compare to other countries?






Optional.......
http://www.thinkadvisor.com/2013/09/20/retirement-around-the-world-how-the-us-system-stac



57 comments:

ThomasT3 said...

While pensions guarantee a monthly income for a retired person, a 401K plan allows individual employees to put a percentage of their salary in a retirement plan that is usually matched by the employer. Pensions put the risk on the employer or plan provider because they are the one’s expected/required to have sufficient funds to pay out. 401K plans put the risk on the individual because he or she chooses how much money they want to put into the plan every year. The 401K plan came about after the “Employment Retirement Income Security Act” was passed in Congress which required corporations to put aside large sums of money to ensure that they had sufficient funds to pay their retired employees. Instead of having to put away large sums of money, corporations decided to use 401K plans to move the risk onto individuals and not be held responsible. Most Americans are not prepared for retirement because many individuals have either not started to put money away for retirement or have not put enough money away to carry them for the rest of their lives. With longer lifespans, individuals are underestimating the amount of money needed to be put away for them to continue their previous lifestyles. Young workers should begin planning for retirement as soon as they start working to ensure that there is enough time for money to be saved. The current retirement scheme will provide security for myself and my parents because enough time and money will be saved before it is too late. The 401K retirement system should stay in place because it can be much more efficient than pension plans and social security if a person invests enough time in learning how to use it. It is not the governments or employers responsibility to ensure a person has a sufficient retirement fund, individuals must do it themselves or look to others for help and guidance.

KateM6 said...

Many people do not know what the difference between a pension and a 401k. A pension was a system used that entailed a regular payment made during a person's retirement from an investment fund to which that person or their employer has contributed during their working life, whereas a 401k is money taken out of a worker's paycheck and stored in a fund with contributes by the employer before taxes. I believe Americans are better off with having a 401k due to the fact that pensions can run out much more quickly. It is crucial for Americans to have the desire to contribute as much as they can while they are still in their working life, or else they will feel the discomfort in their funds when they retire. One of the articles states that pensions can provide for a short number of years, but with the climbing expenses in the country, many retirees will exhaust their funds. I think that in order to prepare for retirement, young workers should try to immediately contribute to a fund with a solid job they know they will receive benefits from, even if you must stick with the same employer for an extended amount of time. Also, an article states that if a retiree is meticulous in their expense and saving methods, money will also be provided to an heir of the family, giving them some future security as well.

Unknown said...

First of all, there is a pretty big difference between a pension plan and a 401k plan for when an employee retires. In simplest terms, a pension plan is when the company you work for puts out a set amount of money for you, without you having to put in any money yourself, into an account for when you retire. A 401k on the other hand, involves the employee putting out a specific amount of their own income into their retirement account.
The 401k plan originated in 1978,when Congress amended the Internal Revenue Code which was called section 401(k) and stated that employees are not taxed on income they choose to receive as deferred compensation rather than direct compensation. This sparked the beginning of the 401k plan. The reason why their was such a huge shift from pension plans to 401k plans lies within the doings of the companies and corporations themselves. They found that with providing 401k plans to their employees, they were releasing the burden of retirement funding from themselves and putting it on their employees.
I do believe that most American workers, from what I have personally seen and heard, is that we are not prepared for retirement when the time comes, leading to great confusion and panic. I think it would help a great amount to help educate and better prepare people of all ages for retirement if they did research on the pros and cons of each type of plan and what works best for them; but more importantly, save! I do not really have a strong opinion on which plan, the 401k or pension, works the best, as I have seen it vary from person to person, but I believe everyone can choose the right one catered to their own financial status if they do the research!

Brooke Mraz said...

When you begin your career and adult life you begin to think of a retirement plan that will sustain you to live out the rest of your days. In order for young workers to prepare for retirement they must begin to save money (when possible) from their paychecks. The choice now is between 401k's or Pension Plans. A 401k is when retirement savings contributions are provided by an employer, deducted from the employee's paycheck before taxation; meanwhile a Pension Plan is a fixed sum to be paid regularly to a person, typically following retirement from service. They're are pro's and con's to both such as that "not every employer [offers] pensions" or that 401k's haven't enable Americans to set aside enough retirement money. This could explain why "more than half of U. S. workers have no retirement plan at all".

Unknown said...

Pensions provide fixed monthly incomes to retirees where 401k requires employees to invest their own wages and make important decisions about their investments. Also, a 401k retains workers’ benefits when they leave an organization and are insure in case the company goes bankrupt. Americans are better off with the 401k plan. There are many benefits to the 401k plan. First, if you are in desperate need of money, you have access to it and however much you need. With pensions, you might lose all your benefits. Also, your heirs will have access to the left over money when you die. Most Americans are not prepared for retirements. Most are the baby boomers that are about 65 years old now. In their 401k accounts, the average said in $60,000. Upon retirement, the average earner needs around $900,000 according to the Employee Benefit Research Institute. Young workers should start contributing money at 35 and put in more than $10,000 a year. I believe that the current scheme will provide security since the money is yours and your family can continue to collect it when you die.

Unknown said...

Pensions, and 401k plans, are truly the basis of most retirements these days. While they are very different, if each is put in the hands of the right American, they can set one up for major success. A pension plan is an amount of money, which is established by an employer, which is to be given to a given employee, in increments, upon retirement. On the other hand, a 401k plan is a fund which both the employee and the employer contribute to over the course of a "work-time", and which is then given to the employee upon retirement. For years, the pension plan was the clear favorite among almost all of America's employers. However, in the late 20th century, a shift, from the pension plan to the "executives cushion money plan", began to occur to cut down on business costs, and to save employers money. While 401k plans come with a tremendous amount of benefits, Americans are clearly not better off, unless they are properly educated, with this plan. Overall, most Americans are not prepared well enough for retirement with this plan, for they are unaware of how much money they should put in the plan, and many are becoming instantly poorer a few years after retirement. In order to properly save, Americans need to start saving more, and earlier, to continue living their working lifestyle upon retirement. While this system seems to be working now, while many are still working and contributing, once these people begin to retire, we will see the flaws in their ways. This system has the potential to work, only if we are educated and contribute often and early. I look forward to seeing our country become educated on this plan, and becoming better off in the future.

Unknown said...

When it comes to saving for retirement, there really is not definite best answer. The thought of living without a job or real income for many years may seem hard or impossible, but it is made possible by two systems, the 401(k) and pensions. Pensions used to be the most popular before the 401(k) was created in 1978, and some people still prefer them over 401(k)s. A pension is a continued salary after retirement that is payed by the employer and calculated based on salary and time worked at a specific job. 401(k)s on the other hand are plans where the employee and employer both add money to a fund and taxes to the money are deferred to the time of withdrawal.
The big question now is which one is better? There is no clear answer, but the general public seems to be gravitating towards 401(k)s. Probably the biggest advantage of 401(k)s over pensions is the ability to change jobs with a 401(k). 401(k)s are under your name and are not linked to your employer, so you can move to a better job at any time, while pensions will “reset” if you change employer. With a 401(k) you can also take the money out in case of emergency and pass down any money that may remain to family if you die. Pensions on the other hand are treated like salaries that are received over time and stop if you die. One problem with the 401(k) system is that many people are not saving enough and have difficulty retiring. The average balance of all 401(k) accounts is $60,000. People often have trouble planning ahead, so in that aspect, pensions win out.

Unknown said...

After reading the articles I think that people should be saving money for retirement as much as possible and as soon as possible. People who are planning to retire are not saving enough because they aren't planning far enough ahead and are in for a rude awakening when the time comes for them to retire and they need to continue working because they don't have enough saved.

mikeoc101 said...

pensions are when employees receive a set amount of money from the corporation they worked at after retirement. 401k is a program that allows employees to set aside a portion of their paychecks to defer taxes until they start withdrawing funds after they retire. I believe that a combination of these two programs should provide for a comfortable retirement. However, I do believe that the pension system in a levels of government and business. When you make over 100,000 in just pensions alone, it just seems so crooked. It is a flawed system that many people abuse for their pleasures at other peoples expense. If your lucky to get a pension, its usually for high level executives who probably don't need it for retirement. If the pension was reformed, I would support it more. In the more socialistic countries of Europe, the elderly are basically living off the government which is wrong in my mind. I'm a firm believer in Social Security, however it shouldn't be used to support a lifestyle, it should be used just to make retirement more affordable. If you start saving when you first start working, along with Social Security should help you live a happy retirement.

GilbertC3 said...

In our current retirement system, it is assumed people are allowed to retire at the age of 65 and enjoy the rest of their lives with benefits from retirement plans such a 401(k). The only problem is that the plans are not benefiting people. Before 401(k), there were pensions which gave employees set amounts of money after retirement, and these were determined by the length of employment and employment salary. While it was a stable retirement plan for employees, it hurt the employer due to the guarantee that workers continue to benefit without investment, but most often run dry before they die. Therefore, in 1978, the Revenue Act, which created 401(k), was introduced as a supplement to pensions. 401(k)s allow employees to set aside parts of their paychecks, supplement matching funds from their employers, and defer taxes until they withdraw funds. While it certainly is a better system than pensions (due to its overwhelming popularity in the present time,) it is by no means perfect. Only a small minority (around 20 percent) of Americans can live comfortably into their 70s and 80s under 401(k). In the current day of an ever growing population and advancements in science that have lengthened the average human life span, it does not seem likely that we can continue to set the retirement age at 65. While it may not receive strong support, I believe the retirement age of receiving benefits must be higher, or the economy will face serious adversity in the near future.

Jessica Gallery said...

People has various views on pensions vs. 401k's. Pensions are when employees receive a set amount of money after retirement, determined by a formula usually involving duration of employment, employees salary and age of retirement. 401k's, commonly known as contribution plans, set up individual accounts for employees, which both the employees themselves and companies add money too throughout ones time at a company. There are many positives and negatives to both of these retirement plans. Pensions benefit the employee because they continuously will provide them with a set amount of money for when they retire. 401k's are beneficial to the employer because they cut the cost of retirement plans significantly. The employees now contribute to their own retirement fund as well. This plan however is also beneficial to employees because it allows them to now move from job to job with their retirement fund still following them. In today's age, the average American has up to 5 careers, so this type of fund helps them in the long run.
Retirement funds have been decreasing significantly throughout the years. As the baby boomers age, there is less and less money to go around. They will be the first generation to do worse than their parents in retirement. Although this is also due to the high number of people retiring at once, it is also largely due to the poor job Americans do saving money. More than half of Americans do not have a retirement plan or money saved at all. In general, 401k's now account for more of the general public having some sort of retirement plan than ordinary pensions. It helps with taxes and allows people to access their money and watch it grow.

VictoriaM2 said...

Pensions are when employees receive a set amount of money after retirement, which is determined by a formula usually involving the duration of employment, employee salary, and age of retirement. . On the other hand, a 401(k) plan sets up an individual account for employees, which both the employees themselves and companies can add money to. The contributions that are made are then invested and any returns are credited to the employee’s account. Since the 1980s, these 401(k) plans have increased dramatically in popularity and are now considered to be the dominant form of retirement benefits. Most Americans today are not prepared for retirement. Many have not set enough money aside and are in danger of going through their savings within a few years of retirement. In my opinion, Americans are better off with a 401(k) as opposed to a pension. First off, this form of retirement plan is available to many more Americans when compared to a pension. In America today, people are often changing their careers, and with a 401(k), contributions are vested immediately and you are still able to carry over your retirement plan to your new career. Although taking money out of your retirement account isn’t a smart move, in the case of any emergency, this form of retirement plan allows money to be taken out as a loan. This is not possible to do with a pension. I think that this current retirement system will provide security for my parents and I because it allows us to have control over the money that we are putting away as opposed to a company controlling this for us. This system also allows savers to leave money for their families after they have passed away.

CatherinePed3 said...

Pensions are guaranteed, stable, monthly payments that function as income for retired people. A 401 k is an investment that employees contribute towards and then have access to after they retire. However with a 401 k you can take money out early if it is necessary. I think that young workers should better educate themselves on their investments and their options for retirement. Also, I believe that it is crucial for workers to start putting money towards their retirement as early as possible. Americans are currently not better off with a 401 k because many didn’t think about how much they would need to retire and how much money that would require them to put away each month. However, I think that if Americans put just a little more time towards educating themselves on the topic of retirement they would be able to better prepare their finances for retirement.
I think that the current retirement scheme will provide security for myself and my parents. My parents have done research on their retirement options and have made plans to ensure that they will be secure financially upon retirement. I believe that if I take the time to educate myself on the options of retirement that I will be able to be secure with the current retirement scheme. I think that education and research is the key to having a secure financial future.

Olivia Shenkman said...

A pension plan is where people receive a set amount of money after retirement. That sum of money is figured out with a formula that considers the length of employment, the salary, and the retirement age. The money is expected to meet the retired person’s needs. However, the plans don’t really take in to account the cost of living and the fact that many Americans have various numbers of jobs throughout life. A 401K is a contribution plan where employees have some control of their benefits but they are expected to contribute some of their wages to their own accounts. The Revenue Act of 1978 created 401Ks so that corporate executives could supplement pensions with extra cash but then they realized that they could cut down their pension costs by putting the retirement fund burden on employees. After that they became really popular. The greatest thing about 401Ks is that workers can take their savings with them when they change over to a new job. Employees who start young should give no less than 12-15% of their income. “The average person will need $900,000 by the time they retire and most people aren’t on the path to reach that goal sum so many American’s aren’t prepared for retirement. Many Americans are struggling to put away enough money because of excessive management fees: “Everyday Americans pay about $164 million in 401K fees to the financial industry.”

TaylorD6 said...

A pension is when employees receive a set amount of money after retirement, determined by a formula usually involving duration of employment, employee salary and age of retirement. A 401(k) is when you set up individual accounts for employees, which both the employees themselves and companies add money to. These contributions are then invested and any returns are credited to the employee’s account.The Revenue Act of 1978 created 401(k)s — their name comes from the relevant subsection of the Internal Revenue Code — as a way for corporate executives to supplement their traditional pensions with extra cash. 401(k)s became really popular in the 1980's.Americans are no prepared for retirement. Most of the baby boomers are in their 60's and 70's now and it seems that most of them are going to be poor or almost poor. They are running out of retirement money and all the current people working in their 40's are not saving up. Being in debt is also preventing these people from saving for retirement. The average amount of all 50 million 401(k) accounts is $60,000. Many of these people will exhaust this money in just a few years.

Unknown said...

A pension plan, or Defined Benefit, is an account that money is put into from the employer and given the employee when they retire. A 401K, Defined Contribution, is also a retirement plan where the employee contributes money to be invested into an account. The second article goes on to explain how your 401K depends on the market; this is because you invest the money you put into your 401K. Also it explains that how adequately you manage your account depends on the success of it. If you don’t stay on top of your account the less likely you are to have enough savings to live off of when you retire. This is also said to be a recent problem with peoples 401K’s. Their insufficient savings will not last them as long as they hoped. I think that it’s never too early to start saving. However, people our age don’t feel the need to save money for their retirement in 50 years.

Melisa Paredes said...

A few years ago thinking of retirement meant having many years of living expenses paid for by the government and we thought it would bring us many benefits but now people are starting to lose their hope for having good retirement plans. Two of the mainly discussed retirement plans are the pensions and the 401k’s. The pension plans are what we think of as employees receiving a set amount of money after retirement. The amount of money received is determined by duration of employment, employee salary, and age of retirement. Unlike the 401k’s where companies and employees add a portion of money to individual accounts, and that money is invested for return. It is like setting aside a portion of your paycheck into retirement funds. The 401k’s are the most common plan of retirement used since the 1980’s and most people argue they are more beneficial to employees than pensions.

Some benefits of the 401k’s are that since employees are receiving money on individual accounts, the money is always there for their use in case of an emergency. It is an easy way of saving money and you have access to it. It also saves money which then can be passed on to your heirs after your death unlike the pensions, where you stop receiving income after your death. Although the 401k may seem like the perfect retirement plan, it has many downsides to it as well. Some say that the 401k’s are failing to provide enough money for older Americans. The problem with this is that Americans are not good at saving money. People who are now turning 65 are saving just enough money to barely make it through a few years of retirement. In my opinion the 401k plan is a lot easier and if you save money wisely and at an early age you will have plenty of money for retirement.

Melisa Paredes said...

A few years ago thinking of retirement meant having years of living paid for by the government and we thought it would bring us many benefits but now people are starting to lose their hope for having good retirement plans. Two of the mainly discussed retirement plans are the pensions and the 401k’s. The pension plans are what we think of as employees receiving a set amount of money after retirement. The amount of money received is determined by duration of employment, employee salary, and age of retirement. Unlike the 401k’s where companies and employees add a portion of money to individual accounts, and that money is invested for return. It is like setting aside a portion of your paycheck into retirement funds. The 401k’s are the most common plan of retirement used since the 1980’s and most people argue they are more beneficial to employees than pensions.

Some benefits of the 401k’s are that since employees are receiving money on individual accounts, the money is always there for their use in case of an emergency. It is an easy way of saving money and you have access to it. It also saves money which then can be passed on to your heirs after your death unlike the pensions, where you stop receiving income after your death. Although the 401k may seem like the perfect retirement plan, it has many downsides to it as well. Some say that the 401k’s are failing to provide enough money for older Americans. The problem with this is that Americans are not good at saving money. People who are now turning 65 are saving just enough money to barely make it through a few years of retirement. In my opinion the 401k plan is a lot easier and if you save money wisely and at an early age you will have plenty of money for retirement.

Unknown said...

For the longest time, it has been widely believed that with retirement comes the many benefits that will ensure you are able to lead a secure and comfortable life for the rest of your days. However, recently, the state of some American retirement plans have been changing, leaving some to wonder just how well they will be benefited when it comes time for them to stop working. Expenses are through the roof these days and many people are starting to realize that their pension plans are not making ends meet. Defined benefit, or what we have come to know as pension plans, is a system in which workers receive a set amount of money after retirement, based on how long they have worked, their salary, and the age of their retirement. While this system has benefited many people, today’s customs have called for a new plan due to the increase of the cost of living as well as employers choosing different benefits for their employees. Defined contribution is a new plan that seems to adapt better to the modern labor force. In this system, employees and their companies add a sum of money to individual accounts. Specifically, in the 401k plan, created by the Revenue Act of 1978, employees get to choose how their money is invested. The switch from pension plans to defined contribution has proven to account for modern needs; an employee can now easily switch jobs and retain the benefits because it is all kept on the individual account. A certain drawback of the 401k plan is that the employer himself is required to set aside some of his own money for retirement. A large portion of the 80 million baby boomers in our population are now running into serious problems - they are reaching retirement age and haven’t put aside enough money during their careers in order to live comfortably. This could very well be due to the recent economic downturn, despite other countries who believe that Americans do not have the ability to predict future conditions and do not adequately prepare for situations like this. Overall, despite the criticisms, the 401k plan holds several positive benefits, including the power to have a better control on taxes. It should rest solely on the individual, not the kind plan they have, the type of retirement lifestyle they have. Young workers should ensure that they are putting enough money aside for retirement in order to live comfortably for the rest of their lives.

gerardmartusciello said...

Pensions are payments received regularly during ones retirement from an investment fund that the employer contributed to during the persons working career. 401k’s are when workers save money for their retirement from their paychecks over a long period of time. They differ because pensions are defined benefit plans while 401k’s are defined contribution plans. As a result of the Revenue Act of 1978, workers were allowed to put away money tax free—until withdrawn—for their retirement. This led to the establishment of 401ks, as well as the declining popularity of pension plans in the 1980s which caused a desire for new ways to save for retirement. The shift occurred as it benefitted employers, who had to now pay less for retirement plans, and there was some benefit to the employee as they could now choose how their money was invested.
I believe Americans are better off with a 401k than with a pension. The first problem with pensions is that you are locked into your job, or you will need to work in the new position even longer before being able to retire which can cause people to not take opportunities for better paying jobs in order to have a more promising retirement. 401k’s also are in the control of the employee, as you get to choose where to put your investments. Also, in case of an emergency you can still take the money from the 401k, which you wouldn’t be able to do with a pension plan. Overall, the ability to control your retirement plan makes me feel that 401k’s are what Americans are better off with. Many Americans will work multiple jobs in their lives, and with a pension plan they may not be able to do so, as they need to work at the same company, in the same position in order to earn pensions.
I do not feel that most Americans are prepared for retirement at the current time. The recent recession has caused a hit to many 401k plans which will take a little bit of time to recover. Also, many Americans underestimate—significantly—how much they actually need to save in order to maintain their lifestyle during retirement, and are therefore running into problems shortly into retirement. I think in order to be more prepared for retirement, workers should start putting aside money starting as soon as possible, and as much as possible, in order to guarantee a happy retirement. I am not sure if the current system will be secure for me personally in the future, as the economy has its ups and downs. I know my parents said that as a result of the recession their 401k was hit, however I still think that they will be able to retire happily when the time comes.
I personally feel that the retirement system should shift towards taxation being funded to retired workers relative to the amount of time they worked, and what they contributed to the workforce. I feel that everyone should have to save up for their own retirement however I also feel that everyone should be rewarded for contributing their lives to the workforce, and should be able to retire happily.
Using http://www.marketwatch.com/story/us-retirement-system-lags-other-countries-2009-10-22 I tried to compare the US retirement plan to other countries, and it seems that we are in the “middle of the pack” for retirement plans. Our retirement plan was given “low marks for adequacy of retirement income”. I think there is definitely room for the US to improve its retirement plans.

JaimeD3 said...

The 401(k) program allows employees to set aside a portion of their paychecks, often supplemented with matching funds from their employers, and to defer taxes until they start withdrawing funds. The Revenue Act of 1978 created 401(k)s as a way for corporate executives to supplement their traditional pensions with extra cash. But when employers realized that they could use them to slash their pension costs by shifting the burden of retirement funding to employees, they adopted 401(k)s in droves. That’s because there are some positive sides to having a 401(k). The assets in 401(k)s vest much sooner, and you own the funds. You can control taxes a little better with 401(k). If you really need it, you have access to the money. Your 401(k) plan may have high fees, but low-cost investments are possible.
I believe that most Americans are not ready for retirement any time soon. People are not saving enough. The Employee Benefit Research Institute says the average earner will need $900,000 upon retirement — a sum few people are on target to reach. Many will just have to keep working. They'll also have to move into cheaper housing, cut back on travel, and live with far greater financial uncertainty. I know personally my mom pushed her retirement back because she believes she won’t have enough by retiring at 65.

KyleZ6 said...

Pensions are defined benefit plans that consist of regular payments made during a person's retirement from an investment fund to which that person or their employer has contributed during their working life. Often, employees receive a set amount of money after retirement, determined by a formula usually involving duration of employment, employee salary, and age of retirement. On the other hand, 401k's are defined contribution retirement savings plans that are sponsored by an employer, allowing workers to save and invest a piece of their paycheck before taxes are taken out. In this case, taxes aren't paid until the money is withdrawn from the account. The 401k model was enacted into the law in 1978 to enable taxpayers a break on taxes on differed income and has been somewhat successful. Today, there is a debate over whether Americans are better off with a 401k or a pension plan. Ultimately though, 401k plans are offered by most employers, while pension benefit access is less and less. State workers such as teachers, social workers, firemen, police officers, and mailmen are the main people to luck out and receive pensions, but those jobs may lose pensions in the near future. Overall, a 401k is a better retirement option because of it's possible low-cost investments, the fact that its assets mature much sooner, the idea you own the funds, and due to the fact of it's availability in emergency complications. It's nice to know that IRA contributions can be withdrawn tax free after five years, and 401k balances can be taken out as a loan. In contrast, pensions aren't the same as they require a person to work a long time before being able to receive access of any benefits. Some people work there whole life, decide to retire, and soon after become terminally ill or die within a few years without seeing much of their retirement plan. For example, my aunt was a social worker, retired, and within a couple years was diagnosed with Alzheimer's. Furthermore, most Americans aren't prepared for retirement nowadays as people acquire better jobs, and spend more as a result. Studies have found that "Even people within 10 years of retirement have saved an average of only $78,000, and more than a third of them have less than $25,000. More than half of U.S. workers have no retirement plan at all. With Social Security averaging $14,780 a year for individuals and $22,000 for couples, many Americans will exhaust their savings in just a few years." This is both a shocking and alarming finding that must be dealt with as it's a major issue that affects the future of our nation.

Unknown said...

Pensions are stable, guaranteed and efficient to meet the needs of retirees. 401ks are accounts for employees that both the employees and the companies add money to. 401ks have become more popular and the dominant form of retirement benefits. The shift occurred during the 1980s because it is a more stable factor. Pensions did not consider the increase in the cost of living and companies had the power to freeze an employee's pension for a cheaper solution. Americans are better off with a 401k plan because of its benefits. Taxes are more easily controlled and you have access to the money in the plan. Young workers should be saving money as they go. Either from pay checks or income, the money should be saved from a worker's first job.

JaclynD3 said...

Benefit plans are a more outdated way of helping fund retired workers. Once they retire, employees receive a set amount of money, calculated by factors including age and length of time they spent working. On the other hand, contribution plans are a more modern, efficient way of distributing the money to retired workers. This method allows for both employers and employees to put money into an account. The 401k model originated many years ago from The Revenue Act of 1978. This was a way for some business leaders to provide their employees with another sum of money in addition to their pension. The shift from the traditional pension system to the 401k system took place throughout the 90s and the early 2000s. It was done because most employers started to realize that this system took the pressure off of them to fund their retired workers and put it more on the employees, themselves. Lastly, I believe that most Americans are not prepared for retirement. In all 50 million 401k accounts that exist, the average sum of money is just over $60,000. Also, about half of all employees within the US have not established any retirement plan. Therefore, without any major foundation or plan for retirement, most people do not seem prepared to retire in the future.

Brian Righter said...

Defined benefit plans, such as pensions, guarantee a given amount of monthly income in retirement and place the investment risk on the plan provider. Defined contribution plans, such as 401(k)s, allow individual employees to choose their own retirement investments with no guaranteed minimum or maximum benefits. Employees assume investment risks in defined contribution plans. I believe that the average American is better off with a pension as it carries with it guarantees that the average American would likely get use out of, however I believe that the more educated and savvy American may be able to reap greater rewards from the 401k plan provided they are willing to take on that risk and are smart enough not to handle it. Young workers should be investing in long term stocks and bonds immediately. There is no reason for a teenager to have money in a savings account that isn't even keeping up with inflation; put the money where it will grow so you have more for when it counts; it's extremely cheap to be young. I do not think that the current system will provide security for me. I will try my hardest not to depend on any type of program to get me through my retirement and I will incur as much of that responsibility onto myself as I can - you never know what can happen. I do not think that social security is the best solution to retirement however I do not know what would be a better alternative. Perhaps privatization would prove beneficial however these are experiments that we can only learn from through tested application.

Ryan O'Connor said...

The 401k plan was created in 1978 and quickly became the major form of retirement program. The idea that the retirement plan was controlled mainly by the employee was very appealing from the beginning to employers. A 401k plan is basically a bank account owned by the employee in which employee and employer contribute a certain amount each payroll period. A pension plan, on the other hand, is a program in which an employee gets periodic paychecks in their retirement from their former employer. The amount is usually determined by a formula considering salary, position, and years of employment. In my opinion, a pension plan is more supporting of the employee because it is a periodic paycheck as opposed to a set amount of money to last a whole retirement period. While the employee can determine the amount invested, this may not be such a good thing. This freedom may not be all it cracks up to be. I think Americans would be safer having a set percentage to invest or receive. Young workers should start investing in their 401k plans as early as possible. As soon as young workers can afford to set some money aside, they should be doing that to support themselves in retirement. The article in favor of pensions concluded that the average balance in a 401k plan is $60,000 while the average worker will need $900,000 by retirement time. This system is setting employees up to be below poverty line after years of hard work. I think the retirement system should consist of a combination of both 401k plans and pensions. The average American cannot survive in retirement with one program or the other, but a mixture of the two programs will be beneficial to people in retirement.

Unknown said...

A pension is a regular payment made during a person's retirement from an investment fund to which that person or their employer has contributed during their working life and a 401k is a retirement savings plan sponsored by an employer. It lets workers save and invest a piece of their paycheck before taxes are taken out. Taxes aren't paid until the money is withdrawn from the account. A 401k came from people wanting to have money for their “golden years.” People started switching from pensions to 401k’s because pensions did not have as much guarantee as a 401k. I think Americans are better off with a 401k because it is a more secure way of making sure that a portion of each paycheck is being set aside for when you need in when you’re older. I feel now that more Americans are prepared for their retirement because of pensions and 401ks. Young workers, as soon as they get their first paycheck should start putting money into their 401k so that they can be prepared for retirement. I think the current retirement plan will help when im older.

James Baxley said...

Even though I am only 17 years of age, retirement has always interested me, pensions and 401k plans are common topics of discussion in my family, especially my Aunt who can't wait to retire from teaching. A pension is basically the money an employee receives after retirement from their former job, as long as they spent a certain amount of years at that particular job. A 401k comes from the money that the employee has saved over time. With each paycheck, a percentage of the money goes into the retirement plan. Most employers prefer the idea of a 401k, as they are not responsible for providing an employee money after their retirement. Having a 401k plan has led to some issues, as many workers mostly from the Baby Boomer generation have not saved nearly enough to provide for life after retirement, and will be forced to work for many more years than previously anticipated. The workers themselves can be to blame for this, as forty-three percent of workers between 45-54 said that they were not saving at all for retirement. This could be because they had little knowledge or were ill-prepared for what retirement consists of. If young workers are going to have a 401k plan, their best course of action would be to begin saving much sooner rather than later. It seems obvious that having a pension would be most beneficial to a worker, but the problem would be convincing business owners to provide pensions for their workers. Pensions seem to be on the way out, and will probably cease to exist in the coming years.

Connor S Per 9 said...

As many Americans work day to day, the majority look forward to retirement. Setting aside a portion of their paychecks to save for retirement, 401k programs are commonly used. However, the retirement system is quickly eroding as more people make use of it and for a longer time.
Retirement plans and the 401k program that were designed in the mid twentieth century might have worked then, but with the improved lifespan of the average American, they are less stable. Because of this, the pension plans have changed for the worse. For example, it is no longer guaranteed that retirees will receive the "10 percent annual return in savings” as many expect.
One suggestion promoting retirement reform provided by the articles is to institute more contribution plans. Often, employers have too much power in pension plans and, as a result, indirectly end up deciding how the retiree will live. With contribution plans, employees have more control over their benefits and lifestyle. Pension plans also limit a workers ability to change job, whereas contribution plans are more supportive.
Essentially, if American society does not alter its current retirement plan for the better, working Americans must begin to save more immediately. Otherwise, retirement may change or disappear entirely as a national institution.

JessicaC2 said...

I think that after reading the articles it seems like it is a no brainer that 401(k)s are better than pensions. They move from job to job, and can be adjusted to provide for better sustainability. I think the only reason that Americans are upset with their 401(k)s is that they weren't smart enough to put aside enough money. Realistically in the current job market, people jump around a lot more. A retirement plan that can follow you from job to job is perfect. Also, you can have as much money as you need fit. With pension's fixed rates, it cannot be guaranteed that there will be enough money to sustain. However, if you have a 401(k) and are responsible with putting away enough money, you can live at the same quality of life, or even higher. All in all, it comes down to how responsible you are. You should make sure than you put away enough money to sustain you for a while, even a little more than necessary. Worse comes to worst, if you put away extra money you can splurge a little when you're older. I think that if a person balances their budget evenly, they can put away enough to have a comfortable retirement and live comfortably in their current age.

John Conlon 9 said...

The biggest difference between a 401k plan and a pension plan is the distinction between a defined benefit plan and a defined contribution plan. Defined benefit plans, such as pensions, guarantee a given amount of monthly income in retirement and place the investment risk on the plan provider. Defined contribution plans, such as 401ks, allow individual employees to choose their own retirement investments with no guaranteed minimum or maximum benefits. I believe pensions are better than 401ks because you are receiving guaranteed money every month, where 401ks you are not sure when or how much money you are receiving. I have faith retirement schemes will provide for my parents. I am unsure how retirements will be when i start working but I am hopeful that i will be safe. I do believe most Americans are prepared for retirement because there are many different retirement plans and Americans have been thinking about it forever.

DonaldS3 said...

There are two main types of retirement funding plans--pensions and 401(k)s. The differences between pensions and 401(k)s are that:
-401(k)s provide money sooner.
-A person retains ownership of
the money at all times in a 401(k)plan.
-In a 401(k) plan, one can make his/her own decisions.
-Pensions guarantee money for the person with the plan only, but a in a 401(k)plan, heirs can get money.
-Low-cost investments are possible with a 401(k), but not with a pension.
-You can change jobs while getting the full benefit of a 401(k), but not with a pension.
But, how did 401(k)s come about in the first place to rival pension plans? You see, the Revenue Act of 1978 created them to allow corporate executives to cut their pension costs by letting the responsibility of retirement funding fall to employees. In my opinion, however, 401(k)s are actually better for today's society because it allows people more freedom in the economy--with its cyclical fluctuation and all--as well as for the aforementioned differences between 401(k)s and pensions. But even though they are better in my opinion, it is apparent that the baby boomers that are now turning old have not saved nearly enough for retirement. Many only saved around $60k-$80k in total, which doesn't last that long, to be sure. The recent financial setbacks are to blame to an extent, but it is really the people's own fault, as they didn't save enough for themselves as indicated by the fact that many in their 40s claim to not save money for retirement. This is a big issue, and as such, teenagers and young adults should be made aware to save as much as possible for retirement (and just more in general). To fix this problem as a whole though, a new system might be needed, such a a sort of hybrid between pension plans and 401(k)s in order to get a reasonable balance of pros and cons favorable to employees in the long term.

OliviaWin2 said...

A pension is the retirement plan where an employee receives a set amount of money after retirement. This amount is based on the duration of employment, the employee's salary, and the employee's age at retirement. Pensions are uncertain, and with a pension, the employer gets to decide upon the benefits an employee receives. A 401(k), on the other hand, is a retirement plan in which employees themselves as well as employers contribute money, which is then invested. The returns are credited to the employee's account, which can help to account for inflation and encourage responsible saving throughout an employee's career pre-retirement. The 401(k) model came about due to the desire of executives for extra cash to supplement pensions. It was then realized by companies that pension costs could be reduces if some of the burden of retirement funds was shifted to the employees themselves. Most Americans, even after the shift to the 410(k) model, are not prepared for retirement. According to the Employee Benefit Research Center, the average American worker will need $900,000 in order to maintain his or her lifestyle after retirement. The average balance of a 401(k) account is roughly $60,000. Young workers should be contributing the maximum they are allowed to their 401(k) accounts every year from the time they begin working, and be sure to continue funding their retirement even when they switch jobs or are in debt. They should also learn how to manage stocks and bonds to produce better returns. I think that the current retirement norm of the 401(k) will work for my parents and, eventually, myself, because I feel compelled to save as much as I can and I am responsible with my money, a behavior I learned from my parents. It will, however, be more difficult to do so because of the enormous costs of higher education, and the debt that I and my classmates will likely have to pay off after graduation.

Unknown said...

A pension is type of defined benefit typically involving an employee receiving a set amount of money after retirement, determined with a formula usually involving length of employment, employee salary and age of retirement. While 401k plans are a bit different, with 401k programs employees have a little more control over their benefits, beneficiaries are often able to choose how their money is invested but whether or not the returns are positive or negative the returns are credited to the employees account. Americans may be better off with contribution plans in the 21st century because with contribution plans its much easier to switch jobs while keeping their benefits, also the limits the IRS puts on how much can be contributed can be adjusted for cost of living increases. Americans became very dependent on 401k's after The Revenue Act of 1978, corporate executives realized that they could cut pension costs by placing the burden of funding retirement plans on their workers instead of themselves. As for most Americans not very many at all are prepared for retirement 43% of workers from the age of 45-54 said they weren't currently saving for retirement at all. In order for young Americans to prevent themselves from being caught up in this retirement conundrum they need to start saving up as soon as possible in an organized and secure way, such as a 401k plan.

Unknown said...

A 401k is a retirement plan where an employee takes a certain amount of money out of their paychecks each week to put away into a 401k account. A pension is when an employee receives payments from his employer after they retire. Employees must work many hours and many years in order to receive their pensions when they retire. In 1980, after The Revenue Act of 1978, employees saw 401k's as an opportunity to supplement their pensions with some extra cash. Employers also found it easier to pay their employees a little extra each week to go into a 401k instead of paying for their pensions after they retire. Americans with pensions benefit because they have a fixed amount of money that they will receive in increments after they retire. However, they may not have a lot of money saved. 401k users benefit because they have a lot of money saved and a large amount of money right when they retire. But if they dont work another job, then they wont have any income and if they run out of money they need to work again. Young workers should work a job where they will receive a pension so that they have income when they retire. They should also make a personal retirement fund or 401k where they deposit 10% of their annual income until they retire. If they have extra money, then they should invest more money into their retirement funds. An average retired employee needs about $900,000 to safely retire. Almost nobody in the working class reaches this goal. The Social Security plans dont look promising for the future, but personal funds do because the stock market can be invested very well.neu

Unknown said...

A pension is a defined benefit plan where employees receive a set amount of money after retirement, determined by a formula that usually takes into account salary and years of service, and age of retirement (ie. social security). 401k’s are a type of defined contribution plan where an employee, employer, or both contribute funds to an employee’s retirement plan. They are dependent upon the returns of the investments that are chosen within them. The Revenue Act of 1978 created 401k’s as a way for corporate executives to supplement their traditional pensions with extra cash. Employers however, adopted the 401k to cut their pension costs and shift the responsibility of retirement funding to the employees. 401k’s allow workers to take their savings with them if they ever change jobs and how to decide to invest in their retirement. Workers also always have access to the money in their 401k account and can be used during an emergency. With pensions, there is a possibility that a worker might lose all of their benefits if an emergency requires him to quit his job before he has qualified for any benefits. Americans do not seemed to be prepared for retirement as the average balance of 50 million 401k accounts is about $60,000 and the average earner will need $900,000 upon retirement. More than one third of people within 10 years of retirement have saved less than $25,000 and more than one half of US workers do not have retirement plans at all. With these numbers, it seems likely that many individuals will exhaust their savings within a few years of retirement.

SamuelO6 said...

The difference between pensions and 401ks is that pensions are retirement options that are given to employees working within a specific company for usually a long period of time. After years a of employment, the employers then usually grant a monthly wage to the employee after retirement depending on certain variables that help pay for the cost of living. However, 401ks involve a certain amount of money that the employee must provide from their own salary towards a retirement fund which can be matched with other benefits that the employer can provide. The 401k model comes from a certain area of the tax code (section 401k) enacted in 1978 and has since then skyrocketed in popularity because most people don't work in the same companies for a large amount of time as well as other factors in today's changing economy, so the pension plan has become mostly obsolete and has been replaced by this plan. The fact that one can control access to this money, taxes, the assets vest much sooner, as well as the widespread availability of the 401k that pension doesn't have anymore (and didn't necessarily have either way). Most American's today, however, are not prepared for retirement because older folks, most notably Baby Boomers, have not saved the substantial amount of money needed to provide for a comfortable retirement lifestyle without working. In addition to a lack of savings comes the financial crisis in 2009 where one-third of 401k assets were wiped out. As a result, young workers should start saving and save a lot in order to put aside money for the uncertain future of retirement. Some say to put 12-15% of monthly savings into a 401k or other retirement plan, but that is the bare minimum in many cases. Many will have to cut their own expenses down on certain things in order to do this. I don't think that this retirement plan will provide great security for me or my parents because of the sheer amount of people that don't save enough doesn't seem to be falling and many people don't seem to realize the cost of not saving for later on in life. I'm also uncertain because of how the economy will ultimately turn out in the future and whether we could have another financial crisis again that could wipe out more retirement funds. I think more pension systems should be put in place to help offset the amount of 401k accounts that people have tried because the benefits of a pension program would attract more people to work those jobs and will compel them to stay. However, this subject is very tricky and is a huge part of society and our economy that it's hard to tell how we can deal with this problem.

Unknown said...

The biggest difference between a 401k plan and a traditional pension plan is the distinction between a defined benefit plan and a defined contribution plan. Defined benefit plans, such as pensions, guarantee a given amount of monthly income in retirement and place the investment risk on the plan provider. Defined contribution plans, such as 401ks, allow individual employees to choose their own retirement investments with no guaranteed minimum or maximum benefits. Employees assume investment risks in defined contribution plans. The 401k model came about in the early 1980s when new legislation made traditional pension plans a potential liability for employers. An underfunded pension plan would now look like debt on a company’s balance sheet. As a result, newly created 401k plans (tax-deferred savings vehicles which place funding responsibility onto employees) gained popularity as an alternative workplace retirement benefit. Since the emergence of the 401k, it had started to gain popularity and by the time I grow up, the pension model will probably be no longer in use. In my opinion, I think pensions are more beneficial as 401ks are failing to provide enough money for older Americans. Most of the nearly 80 million baby boomers ( the oldest of whom are just now starting to turn 65) haven't put aside nearly enough, and are in danger of exhausting their savings within a few years of retirement. This also leads me to believe that most Americans are not prepared for retirement as they are being left with nearly nothing. I think workers should start organizing a retirement plan at a young age which may mean weird but it could alleviate a lot of stress that it could cause. To plan something like this out, you would need a clear plan, start saving immediately, get/stay out of dept, develop and monitor budget, and to invest. I do not think the current retirement scheme is too bad and not should be too harmful on me or my parents.

Unknown said...

I believe that there is a happy medium. It seems necessary for people to be given assistance during retirement however, the concept of defined contribution plans does not seem explicitly horrible. Therefore, it is important for people to earn their right to accept defined benefit plans by putting money towards defined contribution plans throughout their working days. Because the amount of money put aside is not nearly enough to maintain the same financial situation, "It looks like most middle-class Americans will become poor or near-poor retirees” (Teresa Ghilarducci). This problem of not having enough can be solved with a little assistance- defined benefit. Since it is said that the concept of defined benefit, “ has become a financial burden for employers”, it will be revolutionary and helpful to both the employers and employees by finding this happy medium.

Saige Ferentinos said...

Even though I’m only 17 it is good to know about retirement when the time comes. The two main types of retirement plans are pensions and 401k’s. A pension is when an employer maintains to give you a fixed payout when you retire, while 401k’s plans allows employees to put portions of their paychecks aside. I don’t know much about different retirement plans, mainly because my parents never discuss those issues with me and my grandpa is still working harder than ever. Even though, he is 78 he has no plans for retiring any time soon and probably will be sitting at his office desk working till the day he dies. He loves working that much. I feel that people have an idea that retirement is so great and wonderful and it will resolve everyone’s problems. That is not necessarily true it even causes some more problems. In most instances people don’t make nearly as much as they when they were working and are just barely skating by, regardless of the plan they use. Growing up in a family that is all about working hard to achieve their goals I feel people should not retire as soon as they reach 65, but wait until they physically cant’t work anymore. If they wait long enough to achieve retirement benefits then they will have more money to spend and won’t need to receive their retirement money for as long.

Unknown said...

401k plans are funded through employee contributions via pre-tax paycheck deductions, while pensions are contributed by employers in payments. 401ks became more popular since people had access to their funds at any time, and they could save money for it themselves. However, it is becoming increasingly difficult for people to save enough money in the 401k every year. As a result, people have to work longer because they don’t have enough money saved to retire. I think that a pension plan is more effective for many Americans, because the employer contributes a set amount of money to the savings. However, pension plans do not allow the receiver to pick the types of benefits they receive. I don’t think that either plan will provide security for me, but the pension plan is probably the most reliable since my employer will save the money for me automatically. I think that neither the 401k nor the pension plan are stable plans for the receiver, because people do not make nearly enough money in order to be able to save some of it to support ~25 years of life without an income.

JacobC2 said...

Pension plans (defined benefit plan) where employees receive a set amount of money after retirement, determined by a formula usually involving duration of employment, employee salary and age of retirement. That money is stable, guaranteed and sufficient to meet the needs of most retirees. 401(k) (defined contribution plan) offers tax benefits and flexibility in both the structure of the plan and the investments that employees can make. Unlike a pension plan, workers participating in a 401(k) also retain their benefits when they leave an organization and are insured in case the company goes bankrupt. In most 401(k) plans, employees contribute money to the plan before income taxes are applied. The interest that accumulates on the funds is also tax-sheltered. Then, any withdrawals the participant makes after retirement are subject to taxes. A 401(k) in today’s society, is much easier and more useful to an employee than a pension plan. Not every employer offered pensions, even when they were popular, the assets in 401(k)s vest much sooner, and you own the funds, you can control taxes a little better with an IRA or 401(k), if you really need it, you have access to the money, there's a chance that your heirs will get some money, and your 401(k) plan may have high fees, but low-cost investments are possible. Americans are better off with a 401(k). Yet, even with these benefits open to Americans, many are still not prepared for retirement. The average balance in all 50 million 401(k) accounts is just over $60,000, according to the Employee Benefit Research Institute. Even people within 10 years of retirement have saved an average of only $78,000, and more than a third of them have less than $25,000. More than half of U.S. workers have no retirement plan at all. With Social Security averaging $14,780 a year for individuals and $22,000 for couples, many Americans will exhaust their savings in just a few years. People, plain and simply, just do a poor job of saving for the future. They should be saving far more than they do currently. Vanguard, a major 401(k) administrator, recommends an annual contribution of 12 to 15 percent of income, including an employer's match. But even that is only enough if you start young: A worker who starts contributing at 35 and earns $43,000 has to sock away more than $10,000 a year, the Center for Retirement Research estimates, to maintain his or her lifestyle after retiring at 65. The Employee Benefit Research Institute says the average earner will need $900,000 upon retirement — a sum few people are on target to reach. The Revenue Act of 1978 created the 401(k) as a way for corporate executives to supplement their traditional pensions with extra cash. But when employers realized that they could use them to slash their pension costs by shifting the burden of retirement funding to employees, they adopted the 401(k) in droves. In 1980, 60 percent of private-sector workers with retirement plans had employer-paid pensions; by 2006, only 10 percent did, and 66 percent had 401(k)s.

JacobC2 said...

Pension plans (defined benefit plan) where employees receive a set amount of money after retirement, determined by a formula usually involving duration of employment, employee salary and age of retirement. That money is stable, guaranteed and sufficient to meet the needs of most retirees. 401(k) (defined contribution plan) offers tax benefits and flexibility in both the structure of the plan and the investments that employees can make. Unlike a pension plan, workers participating in a 401(k) also retain their benefits when they leave an organization and are insured in case the company goes bankrupt. In most 401(k) plans, employees contribute money to the plan before income taxes are applied. The interest that accumulates on the funds is also tax-sheltered. Then, any withdrawals the participant makes after retirement are subject to taxes. A 401(k) in today’s society, is much easier and more useful to an employee than a pension plan. Not every employer offered pensions, even when they were popular, the assets in 401(k)s vest much sooner, and you own the funds, you can control taxes a little better with an IRA or 401(k), if you really need it, you have access to the money, there's a chance that your heirs will get some money, and your 401(k) plan may have high fees, but low-cost investments are possible. Americans are better off with a 401(k). Yet, even with these benefits open to Americans, many are still not prepared for retirement. The average balance in all 50 million 401(k) accounts is just over $60,000, according to the Employee Benefit Research Institute. Even people within 10 years of retirement have saved an average of only $78,000, and more than a third of them have less than $25,000. More than half of U.S. workers have no retirement plan at all. With Social Security averaging $14,780 a year for individuals and $22,000 for couples, many Americans will exhaust their savings in just a few years. People, plain and simply, just do a poor job of saving for the future. They should be saving far more than they do currently. Vanguard, a major 401(k) administrator, recommends an annual contribution of 12 to 15 percent of income, including an employer's match. But even that is only enough if you start young: A worker who starts contributing at 35 and earns $43,000 has to sock away more than $10,000 a year, the Center for Retirement Research estimates, to maintain his or her lifestyle after retiring at 65. The Employee Benefit Research Institute says the average earner will need $900,000 upon retirement — a sum few people are on target to reach. The Revenue Act of 1978 created the 401(k) as a way for corporate executives to supplement their traditional pensions with extra cash. But when employers realized that they could use them to slash their pension costs by shifting the burden of retirement funding to employees, they adopted the 401(k) in droves. In 1980, 60 percent of private-sector workers with retirement plans had employer-paid pensions; by 2006, only 10 percent did, and 66 percent had 401(k)s.

EdanA said...

The best time to start planning for retirement is 20 years ago. The second best time is right now. My older brother is a smart and successful guy, but he doesn't let that go to his head. He saves a very high percentage of his income. His employer offers a 401(k) match up to 7% of his income, but he knows that's not enough. I think that saving for retirement should not be the responsibility of the employer nor the government, but should lie with the individual. That being said, people should be paid wages that they can save for.

Unknown said...

I feel that b by the time I retire, a 401k is a "safer" safety net. Being that a pension comes from the company you work for and that the 401k is something you personally invest in, it seems that having a "private" account for my funds is better. I witnessed my grandpa, who was a printer, lose his pension as his profession waned. This is the case with many businesses when technology replaces human labor, thus forcing businesses to outsource or close.
I figure that Americans should invest in retirement accounts ASAP. the earlier one starts, the bigger safety will be provided when one retires. And in addition to having a retirement account, the American worker should strive for a pension anyway. Besides, more money is more safety.
Lastly we should consider the eventual instability in the SSI system, a private retirement account is yet again the way to go. As for my own retirement, I hope to (in. Addition to living here) retiring here on Long Island. But of course, only time will tell if that's still feasible

JosephM3 said...

The difference between a pension and a 401k is that a pension is gathered through one job over the course of the time you are employed there. A 401k is the money that accumulates over the course of your career, no matter what job you switch to. I think a 401K is much better than a pension because money will be saved at a younger age and there will be more money saved by the time you retire. I think the current system will be good for me and my family because we will have money saved to last us the rest of our lives if i plan ahead and buils up a strong 401K. However, with the lack of knowledge leading up to now about retirement, most people are not prepared for retirement.

Colev6 said...

The difference between pensions and the 401k Is that you can obtain a pension if you work at the same job for a long period of time while if you use a 401k you can start saving at a younger age and change jobs. In the 1980s 60% of Americans had pensions but by 2006 only 10% had Pensions and 66% had 401ks. Most Americans are not prepared for retirement. Many people from the baby boomer generation do not even have half of what they need to live a comfortable retirenmet. The retirees will have to get part time jobs to have enough money to live. They will have to get cheaper housing and have to cut back on traveling. Most of all they will not have fanacial security. The baby boomer generation is the first generation to do worse in retirement than their parents. I think as long as you use the 401k and start saving at an early age, this retirement plan will work for most Americans.

HugoM6 said...

In recent times, pensions are being phased out and replaced by 401(k)’s. A pension is money paid to a retiree in fixed amounts. A 401(k) is a system designed for individuals to accrue wealth through deposits into the account over many years. Many employers offer 401(k) matching, where they will match the amount of money deposited into a 401(k). The concept of a 401(k) is outlined in section 401(k) of the Internal Revenue Code. I believe Americans are better off with pensions because it removes the responsibility of having to manually deposit money. Most Americans only have about $70,000 dollars saved in their 401(k) out of the desired $900,000 needed to retire comfortably. Americans are not prepared for retirement. Many retirees continue to work part time jobs even after retiring. Young workers should be saving their money and not spending it on depreciating items. I believe the current retirement scheme should work for me and my parents because we are fiscally responsible and make sure that money is being put away for the future.

MaxG6 said...

The biggest difference between a 401k plan and a pension plan is that pensions guarantee a given amount of monthly income in retirement and place the investment risk on the plan provider. 401ks allow individual employees to choose their own retirement investments with no guaranteed minimum or maximum benefits. Employees assume investment risks in defined contribution plans.The 401k plan came from a law passed in 1974 by Congress called the ERISA (Employment Retirement Income Security Act) which was designed to help protect workers from corporations that went bankrupt and didn't have enough money set aside in their pension funds. This put the risk on employees instead of corporations. Most Americans are not prepared for retirement because they do not know what to expect and do not know how much money to set aside that will last them as long as they need it to last. People do not realize how fast money goes by and how much money you truly need to be set for the rest of your life after retirement.

ShaneH3 said...

A pension is a contract, with the company that an employee works for, that entitles them to financial benefits after they are finished working with the company. The plan can be varried such as being paid a set amount per week for a certain amount of years, a lump sum, or being paid for a lifetime. A 401 k plan is usually money that an employee sets aside and gets matched with an employer. The 401k came about during the 70’s when people started to live longer and need benefits other than social security that could assist them in retirement. The Revenue Act of 1978 enacted the a way for employer to match the money that an employee would set aside for retirement. During the ‘80’s, the pension plan was widely popular since 60% of americans had one. More recently in 2006 on 10% have a pension plan since it’s more cost effective for the company. Americans are most definitely more worse off with the 401k since they have to put money forth in order to have one. In the long run, thousands of dollars need to be put away which makes it seem like the employee is getting more but the employer can put forth less. The majority of Americans will not be prepared for retirement since the life expectancy has been going up every year. The majority of people retiring in the next few generations makes up a large part of the work force and so social security funds won’t be a reliable. So more of what they will be relying on is there pensions and 401k’s which will not be sufficient. In my opinion, younger workers should be investing their money in stocks since they would produce more of a gain than a traditional retirement plan. Since my mom is already retired I know that it has a sense of security currently.

Joseph D'Orazio said...

The biggest change in retirment in the past 30 years is the shift of defined benefit pension plans to 401k employer plans. The main difference between the pension and 401k is that it shifted responsiblilty of saving and planning for retirement from the employer to the employee. The 401k model was first introduced in the 1980’s. New legislation made traditional pension a liability for employers An underfunded pension plan would look like debt on a company’s balance sheet.
It was a huge cost save for employers because they did not have to administer the plans of their employees. Americans are better off with a 401k because it benefits both the employers and employees. Most americans are not ready for retirement because they believe they have more time than they actually do to start saving. Over one-third population have less than $1,000 to put away. Young workers should start thinking about retirement right as they obtain a steady paying job. The perfect age to start saving for retirement is 30. I believe that the current retirement scheme does not provide security. If something unexpected happens, such as illness, one has no way of paying for it because they have no income. The best thing for retirement today, is for employers to offer pensions. Other countries are better to retire in for numerous reasons. Other countries have a lower cost of living, cheaper real estate, and better special benefits.

Unknown said...

There are several differences between retirement plans such as pension and 401(k)s. With a pension (so long as it remains), you basically have a determined fixed income for the rest of your life, participation however is necessary by the participant, but otherwise there is little to no maintenance involved. A 401(k) (enacted by the Revenue Act of 1978) however, is always legally yours no matter what circumstances, you can change jobs, decide what you want to contribute, and manage your money at any time. The switch from pensions to 401(k)s began after the stock market devastation of the 1970's. Pensions became a “long term liability” for corporations in America. A 401(k) is the better option (if you properly plan and save) being that it is under your control and if need be, you can access the money. Most Americans today are not prepared for retirement, being that they did not invest enough in their plans, or worse, have not begun saving yet. In order to prepare for retirement, young workers in America should begin putting money aside as soon as possible, even if just in small amounts, starting early can make a huge difference in the long run. Being that I’m (unfortunately) completely unaware of what my parents are doing retirement wise, I think a 401(k) would serve me better in the long run, as long as I start saving early on (though I’m not exactly sure how that will work out, being that I’ll most likely be living out the rest of my life as a slave to student loans).

Patrick Teese said...

Most Americans are not prepared for retirement. The systems in place have remained relatively the same, but the economy of which they are a part has developed and changed significantly. Retirement plans are not keeping up with our modern, inflated economy, and the current retirement system will likely not be in place for my generation or perhaps my parents.
Defined benefit plans, like pensions, however, would help to offset this change by accounting for up-to-date aspects like standard-of-living. On the other hand pensions discourage mobility, both socially and economically, by effectively preventing people from leaving their current job for a higher paying job. The time needed to develop a sizeable pension is impractical in an economy that sees employees frequently switching jobs.
Defined contribution plans, like the 401(k) plan, are much more popular now and have been since the Internal Revenue Act of 1978, after which employers realized these plans could be used to place most of the burden of financing retirement onto employees. These plans, unlike defined benefit plans, operate through investment of funds from both the employer and employee, which hopefully earns returns for the employee. With uncertainty in the stock market, this option is less guaranteed and reliable.

Nick Talbot said...

The 401(k) program has been the standard model for American retirement funds for a while. The program allows employees to set aside a portion of their paychecks, often supplemented with matching funds from their employers, and to defer taxes until they start withdrawing funds.

However, the program is beginning to fail our current baby boom seniors. The Baby boomer generation hasn't nearly put away enough money for retirement in which the 401(k) program can be effective.

The savings of these new seniors is insufficient to support them for years and years to come. Unfortunately, many of these Americans are ill prepared for retirement. That being said, 401(k) is the better option over pensions. Pensions are much less reliable than a 401(k) plan and while it can be difficult to save enough money for a 401(k), they are dependent on the individuals. To rely on a pension is to rely on a plan proposed through a business that may or may not offer an attractive sum of money for savings. Also, there is a chance that heirs will reap some of the benefits acquired through a 401(k).

Perhaps the most important factor is that the money in a 401(k)is owned, unlike the credit of a pension. In this age of extreme debt and bad credit, coupled with an oftentimes lack in trust of banks and employers, it is important to outright have ownership of your money.

Unknown said...

In my opinion, I believe most, if not all, of the employed people in the world are working in order to achieve a successful retirement fun and enjoy the rest of their life the way that they would want to. Although Social Security still exists, retirement funds have changed over the past two decades. One big part of retirement funds today is defined contribution or the 401k plan. 401k types are the most popular types of retirement plan available in U.S. today. It’s planned by the employer, though technically the contribution is by the employee. It is basically a saving for the future in which the employer holds back some part of the salary of the employee and uses it as a contribution towards a fund which the employee gets after retirement. Another type of retirement plan is defined benefit or pension. A pension is very much like the 401k plan except in a pension, an employee receives a predetermined amount every month. This amount is dependent upon the salary as well as the number of years of service. On the other hand, contributions in a 401k are mostly made by the employee in the form of a percentage of his salary held back by the employer. This means that an employee has control over his investments in a 401k plan and he can choose to increase or decrease his contribution which is not possible in pension plan.
According to the second article, 401k plans are failing Americans. Older Americans simply do not have enough money in their retirement plan to live their life they would like to. On average, Americans only have about $60,000 in their 401k plans but even more than 50% of American workers don't have.
Most Americans are not ready for retirement. In the second article, The Employee Benefit Research Institute says the average worker will need $900,000 upon retirement and there are very few people who are on target to reach this amount. Many people,especially the baby boomers, are going to need to work longer than they might have expected and they might also need to cut back on a lot of things just to insure that they will have enough money to eventually retire.

Unknown said...

Saving is something everyone stresses about when it comes to thinking about retirement. Since the 1980’s, more and more people have been switching their retirement plans from pensions to 401ks. The reason for such a switch can be due to the amount changing jobs in America. People today switch jobs more than those born before the baby boomers. Switching jobs means people will switch their retirement plans since pensions are employer-paid. As for 401ks, people can choose how much to save and can keep their savings when changing jobs. This however, can prove to have some problems. The main problem is saving; people need to save more of their income so they can have a better retirement. This can be a disadvantage to those who haven’t been saving or putting money aside for their 401k where this can create financial stability. While the 401k plan seems to be better than an employer-paid pension, each plan has its own strengths and weaknesses. The 401k lets you decided how much, but yet paying fees can take away as much as 10% of savings. With a pension, the amount paid by the employer is not a choice, but there are no concerns of starting to save early on.

Unknown said...

Pensions have begun to fade out of focus with inflation and job volatility, pensions can barely cover a one bedroom apartment. With pensions not being worth it anymore a new option called defined contribution plans has taken over. This allows workers and companies to add a portion of money to their individual accounts and the money is invested for returns. this plan also takes into account realistic variables in modern life such as: cost of living changes, job volatility and adaptability. Contribution plans are great for employers but a win lose for workers. It significantly cuts the cost of retirement plans but employees do have some control over their benefits and are able to choose how their money is invested. The 401K plan is an alternate option to a pension plan. Instead of getting a fixed wage from a pension, employees choose what to invest their money on for a 401K plan. This is either a great thing or could turn into a terrible thing. I honestly think that retired workers should stick with pensions because they are more fair and have no risk unlike the 401K plan.