sock post removed
The big problem I have with the decline of the fixed benefit pension is that it in effect, requires the general public to be savvy financial planners, or pay a lot of money to someone else to do it for them. I mean, I’ve been to business school and am an intelligent guy. But I don’t have the time or the inclination to look over the prospectuses of every fund my 401k wants to invest in, nor am I that familiar with the financial markets to feel like I’m making an informed decision. I know enough to be dangerous, and I know it. So I pay the company that administers my 401k to manage it for me. Which makes me uncomfortable in no small amount, but what other alternative do I have?
And I’m sure there are people who are less educated and/or less intelligent who just don’t have a clue and muddle through as best they can, both losing money and not getting the maximum return they can, which is almost criminal.
I feel like maybe some sort of hybrid should be the default. Not a defined benefit plan; those are too unwieldy and onerous these days for companies to fund. But something other than a “We’ll match 25 cents for every dollar you put in your 401k. Peace out.” plan by the company. Maybe some kind of large-scale professionally invested fund that you own X many shares of, and that the company pays for the management on, and that has certain regulatory requirements to prevent shenanigans and overly risky investments. That way, people could put their money into their retirement fund without having to sweat whether they handle it correctly, and also be assured that they’re very unlikely to lose money. And be able to roll the value of their shares into the next company’s plan if they switch jobs.
I don’t know… the 401k scheme just seems to me like it puts undue burden on people who aren’t properly prepared or equipped to handle their retirement finances. Kind of a “Oh well, sorry you distributed your 401k into the wrong funds. Have fun eating that dog food in retirement.” situation.
That said, I don’t think the employer should be on the hook for economic downturns either. That’s a big problem with defined benefit pensions; they put the company on the hook for a fixed amount whether or not the company is profitable or if the investments meant to fund it are doing well. Most can’t hack that- only governments can somewhat reliably do that.