What is the history of pensions and retirement income in the United Stated?
The era of defined-benefit pensions in the United States is coming to an end, and most people save and invest for their own retirement with defined-contribution systems such as 401(k)s and IRAs. Many employees lament the passing of defined-benefit system since they guarantee lifetime income; however, they seem to just be too expensive to run and maintain. I'm wondering: how did people fund their retirement before Social Security and Pensions. In particular, I'm thinking that many people do not "voluntarily" retire: they simply become unable to continue working.
While it is true that Defined Benefits are being phased out by employers over time, that does not stop someone from self funding their pension. You can simply self-annuitize all or a portion of your Defined Contribution plan at retirement. This is actually a safer form of payment and still allows you greater control during the accumulation years.
A pension fund simply makes investments on your behalf while pooling you with others. Somtimes those invesment decisions the pension fund makes are poor. Sometimes the overall demographics of the particpants is very different than you leading to a poor investment strategy. Sometimes the pension funds make actuarial assumptions that are unrealistic. In the long run your actually better off with the 401k and employer match. Once you retire, you can then determine if their is a need for a level income, and then possibly annuitize yourself. The payments will be the same with better options for beneficiaries.
Feel free to read the Hub I wrote on this exact topic.
http://landmarkwealth.hubpages.com/hub/ … on-options
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