[dragontamer]

401k plans have huge society inefficiencies. If someone dies early, the 2 or 3 million they save up in a 401k plan is wasted. Pension plans can capture that inefficiency and provide superior value over 401k plans as a result.

Annuities try to bridge the gap. But I admit that I don't know too much about them.

Stocks and stuff are nice. But what happens if you die early or outlive your savings? At an individual level, you cannot plan such a thing. But a decent annuity company can provide value by smoothing out that kind of variance.

Pensions were a combination of stock plans + annuities. The main issue with Pensions is that people live a LOT longer today than they used to 40 years ago: medicine has gotten much better. So most pension plans (including Social Security) have underestimated how much they need to pay out.

"Fortunately", the American life expectancy is dropping due to the opioid crisis. So maybe things will be a bit better for pensions / annuities / Social Security than we expected just 5 years ago.

[berberous]

The 2 or 3 million? I think I read recently that less than 10% have a million, 2 or 3 million is 1% territory. And if someone does save that and dies early, how is that 'wasted' if it goes to support their family?

Annuities can 100% bridge the gap. The problem is most Americans are financially illiterate, this stuff (401ks, annuities, how much to save) is too complicated for them and most people are too impulsive and consumerist to save enough.

So 401ks/annuities are better on a societal level assuming prudent savvy employees, which is a completely false assumption.

[dragontamer]

> The 2 or 3 million? I think I read recently that less than 10% have a million, 2 or 3 million is 1% territory. And if someone does save that and dies early, how is that 'wasted' if it goes to support their family?

In particular, it could have gone back to their family sooner. IE: Leaving money in your 401k plan means NOT paying for your kid's college tuition with that money (or their house, or their first car, or their wedding)

Sure, maybe the kid will get a giant payout when they're 30 or 40 years old. But by then, their lives are probably established and they don't really need the windfall. And they only get that windfall if you die.

> Annuities can 100% bridge the gap.

Annuities have the same failure mode as pension plans: if they fail, then no one gets the money they were promised. When comparing 401k plans vs Pension Plans, its definitely a factor to consider.