this post was submitted on 26 Jun 2025
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We deserve pensions and have really fucked up letting corporations rob us of them, along with all the other things they've slowly stolen from the working class.
That being said, a 401k absolutely can be more than enough to retire on, as long as you start investing young
How are you Americans defining a pension? As I read it, a 401k is a Defined Contribution plan invested in stocks/shares, with contributions from the employee and employer.
Which matches a normal UK definition of a DC pension plan, do you only class Defined Benefit schemes as a "pension"?
Sorry - I'm a fucking freak and I like this stuff.
Pensions generally are Defined Benefit plans versus 401(k), which are Defined Contribution plans. There are some definitions that lump (k) in with "pensions", but they are quite different.
DB says "do XYZ and the plan guaranties a fixed percentage of your average earnings at retirement". The benefit (or the result) is defined.
DC says "employee/employer can make contributions with specific advantages, and what you have at retirement depends on what you put in, and ROI, and market magic". The contributions are defined.
The reason a (k) plan is powerful is that earnings compound in a tax advantaged environment, and there are fiduciary guardrails around plan administration and governance that better protect investors than the open market.
Pension plans in the US are basically dead or dying - variety of reasons, but volatility of everything and eroding labor negotiating power are easy to blame. Ballooning cost of these plans is also a real problem. Because a pension promises a given outcome, the employer can have enormous liabilities to fund the plan. Inflation, volatility, and business outcomes can put the company in the position where the liability to the pension becomes an overwhelming burden.
401(k) is a really powerful investment tool, with or without an employer match. I wish more young employees understood them better, and were more interested in using them. It's easy to pine for the pension plans of the past - they have problems of their own that (k) plans do not. Pensions are really designed so that an employee stays at a job for a long period of time before they bear full fruit. A (k) plan is more flexible and transferrable.
Wish I had a pension, but I also don't have much faith in any company in the private sector having the staying power to make a pension the basket where all my retirement eggs would sit. DC plans can help solve for that.
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