| "The market has consistent returns over time" is simply PR to get people to throw their money in. No different than the PR about bitcoin or any other asset/investment/gambling. "The market" ( which primarily means the S&P 500 ) has only been around a few decades. Talk about "consistent returns is silly for such a short time frame. Also, if we look at other "markets", like the Nikkei for example, we know that the market doesn't have consistent returns over time. The biggest problem with 401ks is that if you retire during a major market decline, you will be hurting immensely. Of course if you retire during market booms, everything is wonderful. Not to mention that most people don't earn enough and/or put enough in 401ks for it to really matter. Ideally we would have government back/protected/insured pensions, just like congress has pensions for itself. But somehow they ended up with pensions and we got 401ks. We already had IRAs so if people wanted to directly be involved in the market, they had the choice. 401ks seem redundant to me. Pensions and IRAs seem complementary. A interesting tidbit - when my company started offering 401ks in the 90s, apparently their match was 25% ( according my old co-workers who were around ). Now it's 3%. Go figure. It seems like companies dangled high matches to get national support for it and once the legislation passed, they cut their match over and over again. Another interesting note is that the old co-workers match are grandfathered in - which means they get that match til they leave. So it seems like corporate america, politicians and the older working generation threw the younger generation under the bus. |
Pensions might appear safe but it's all an illusion. If the employer becomes insolvent then you'll only receive a fraction of what you're owed; PBGC insurance is very limited.