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Can 401(k)s Replace Pensions?

Many employees can earn as much retirement income with a 401(k) as they can with a traditional defined-benefit plan, a pro-employer advocate asserts.

David M. Katz, | US
September 15, 2006

Who are we kidding?

This view of 401k versus defined benefit plans absurdly assumes that the younger, much less paid, employees will have enough money or discipline to be able, or want, to contribute to a 401k in their early years. If they did, at maximum amounts, it might be true and that scenario is highly unlikely for all but the professional white collar ranks, if even then.

Posted by Jim Christie | October 04, 2006 06:06 pm


Employees that are loyal to their employers should be rewarded for dedication. In many cases the meager salary increases and bonuses employees receive arenít in pace with inflation. The increase in healthcare is a staggering example of the inflation risk faced by employees. Many citizens live from paycheck to paycheck and are unable to participate sufficiently in 401k plans to provide for retirement. A large number of employees neither consider inflation, nor seek the advice of financial experts for guidance. Automatic payroll deductions are absurd because they would strain employees, and in many cases would make home ownership and saving for their childrenís education merely a dream. The United States faces long-term consequences if we donít act now to avoid a future of mounting health and poverty issues. The problem will not get better over time and will be left for future generations. Paul G. Taman, CPA

Posted by Paul Taman | September 18, 2006 12:42 pm


Basically, 401Ks need to provide a low cost (low expense ratio) index fund and participants will beat 80-85% of actively traded funds (after costs/tax). Then it's up to the person to take some responsibility for their future ... it's really about deferring gratification and not getting caught up in consumerism. The savings rate is close to 0% in the U.S. (above and beyond a forced savings vehicle like a mortgage). The 401K issue is just a slice of a much larger issue.

Posted by Michael Perla | September 16, 2006 12:34 pm

DB versus DC

Defined contribution plans are merely a company cop-out to transfer more risk onto employees. Employees already have the risk of uncertainty in employment, unless they are unionized. Defined benefit plans, therefore, should be mandatory by law, to ensure that an employee has some form of security in retirement. People retire, not companies.

Posted by David Newman | September 16, 2006 12:28 pm

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