But suppose his buddy down the street had an idea for a new business they could start and Mr. Railroad Worker would be in charge. Mr. Railroad Worker would say, "What are you kidding? I only have 15 more years before I get my pension. I can't quit and start a new venture with you!"
The system put a damper on innovation and job creation.
Now, with this new portable pension, each worker has ownership of his or her retirement money. All of us are able to change careers and start any kind of business we want.
HOORAY! The individual is in charge!
But wait...
OH NO! the individual is in charge!
Most 401(k) plans require that the individual actually put some money in. The employer will match funds, but you have to ante up. It's your own fault if your 401(k) is empty. And you are free to screw it up.
Old-style pensions were managed by the employer and doled out a set amount each month. Pension plans could go under if the company went under, and the individual is powerless to do anything.
Pensions and 401(k) plans are both subject to the market. But the employer swallowed the risk in pension plans. With the 401(k), the risk and the reward is on the individual. The individual has the power with a 401(k).
It started out that the muckity-mucks in large companies wanted a way to feather their own nests. But in the end, all of us are more free to move around, improve ourselves and our careers, and maybe even find our own path to muckity-muckhood.
It just shows how it's best not to over-regulate market forces. If the government gets out of the way, things can shake down in positive ways. No one predicted how this would happen, but it's resulted in a lot more freedom for everybody.
Article comments
1 - Joanne Huspek
So, what you are saying is that we should have invested in gold bars?
My 401K plan is on such shakey ground right now, I'm not sure there will be anything left when I retire. I've been losing money, even though I'm paying in. Might as well have put it into a bank account with 1% interest.
Or put the money in my safe.
2 - Joanne Huspek
So, what you are saying is that we should have invested in gold bars?
My 401K plan is on such shakey ground right now, I'm not sure there will be anything left when I retire. I've been losing money, even though I'm paying in. Might as well have put it into a bank account with 1% interest.
Or put the money in my safe.