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For me, a 401K would suck compared to my pension plan. For some others, a 401K would clearly be superior. I worked for a large employer (at one time about 70,000 employees) starting in the late 1960's. At that time 401Ks did not exist. My employer did offer a pension plan where the employer paid most of pension contribution and the employee paid the rest.

In the early 1980's some of the employees unionized and in exchange for a lower wage increase got the employer to pay the entire pension contribution. This improved benefit was quickly passed on to non-unionized employees also.

In the mid 1990's the employer established a 401K plan. Existing employees were allowed to stay with the old pension plan or switch to the 401K plan. New employees could not participate in the old pension plan.

In the early 2000's the employer downsized by offering an "80 and out" program, which allowed people whose age plus years of service was 80 or more to take an early retirement. As an incentive to encourage more people to retire early, the employer increased the multiplier used to calculate pensions by 0.25% for the 80 and out program. That allowed me to retire with over 30 years of service in my 50s and still have an income I could live on comfortably.

The only real drawback I saw was that the pension has almost no provision for cost of living increases and I am likely to see significant inflation before I die. My plan is wait until I am 66 or older to start collecting Social Security so that a higher percentage of my income is adjusted for inflation. If significant inflation occurs before then, I will withdraw some of my savings to suppliment my income.

One of the things I like best about my pension is that I cannot outlive it. It is true that if I die early I will not get a lot of money back from my pension or Social Security. That does not bother me. I figure if I am dead I will not need a lot of money.

I have had good luck with my pension. There are some others who have not.

Some people had underfunded pensions with employers that went bankrupt, which resulted in their pension benefits being reduced. I know one widow who had a pension from her husband's employer. Her benefits only lasted for 15 years, so she spent the last years of her life living on only Social Security.

My pension did not vest until 10 years after I started working for my employer. If I had left my job before then, I would have lost my pension. Obviously a 401K would have been better in that case.

When I started working most employees worked for one employer most of their working lives. Defined benefit pensions made sense. Today an employee is likely to change employers multiple time, so a 401K plan probably makes more sense.

A pension is better, because the company pays for most, if not all, of the pension. For example, my wife works for a company and her union negotiated a retirement plan where she gets a lump sum of hundreds of thousands of dollars when she retires. And, she doesn't pay a dime for that. However, her union's collective bargaining agreement must be renegotiated every 10 years or so. And, at the next negotiation period, the union could negotiate the pension away, and she would get nothing. Also, if the company goes bust or gets sold, all bets are off and she could get nothing.

I work for a company that has a 401k plan, where I contribute about $10K a year and the company matches that about 33% on average. So, I'm immediately getting a 33% return on my investment. However, I'm at the mercy of the market as to how much it grows, whether I invest in stock funds (risky, but high reward) or the money market (safe, but low reward). And, while I do get a tax deduction on the actual cash I contribute, it is coming out of my gross pay.

I guess I'm at least glad I have something. A pension would be nice. But, a 401k is not a bad alternative. Ten years ago, I had about $40K in my 401k. Today, I have about $250K. But, I got lucky with the last big market crash in 2007. Before the crash, I switched my investment from 100% stocks to 100% money market. While everyone else saw their 401k drop some 40%, I actually saw a 3% annual return. Then, when the market started to recover, I switched back to stocks with the Dow at about 6500 and have seen about a 40% return over the last couple of years. If I hadn't done that, I would not have made a dime over the last 4 years as the market tanked and then recovered.

*snort*

With the exception of local government pensions, most pensions are based on 1% per year of service. To get 50% of your income for the rest of your life, you'd have to work there 50 years or well past 60. Since most of us change jobs 2-3 times, we won't get there.

Pensions are called defined benefit (fixed amount per month paid out after retirement) plans and the risk of funding them goes on the employer. Most private companies have closed or cancelled their pension plans because they couldn't afford them. I took the check I got and rolled it to an IRA. The employees who were within 10 years of retirement (and planned on another 10%) were shell shocked.

401Ks and IRA are called defined contribution plans (employee and employer determine amount going in). If one is lucky and employer matches some fo the contribution. Smart employees put in 15% or more per year. Most employees put in less than 3%. The average retiree account is about $30,000 and would be enough to buy an immediate annuity of $190 a month. (The problem with the annuity is that they are affected by the interest rates in play when you buy them.) The risk of it being unfunded is solely on the employee.

Makes SSA look better and better...but there's always talk of means testing social security. That is, if you have $40,000 of other income (whether it's from wages or investment), you don't get all of it.

Consequently, many people who are at retirement age are not leaving the workforce, which is really squeezing young people just out of school.

First, your calculations are somewhat incorrect. With a 401(k) (and I will go by the average match of 50 cents on the dollar up to 6%), you would be putting away 9% if all you did was the minimum of 6% (6 + 3%), so now we are up a bit to $2,700 per year. However, most people who save for retirement save more - closer to 9 or 10%, which means that 12% of your earnings (9% plus the 3% match on the first 6%) are going into the 401(k) - $3,600. Even if you made no money, you're up over $100,000...still not enough, but better (that's a suggested $4,000 per year withdrawal give or take). However, historically (even including the last few years of ups and downs), the average stock market return is 8% and the average bond return is 5% - thus, a nicely diversified portfolio should give you at least a 6% return (this is heavily weighted towards bonds which is not wise early on). A quick spreadsheet calculation with simple compounding works out to a balance at the end of 30 years of just over $305,000 - now your annual withdrawal of 4% is over $12,000 per year

While this is still not as good as the 60% of $30,000 (most DB plans pay out 2% of high three times years - so 30 years time 2%), which is $18,000 annually, it's a bit closer. If you are more aggressive in your investments and get 7% (about 66-34 stocks bonds), your balance is now $365,000 when you retire - about $15,000 a year. Or, if you do as someone else suggested and put away 12 - 15% (let's go with 12 for the sake of argument), your total contribution becomes $4,500 per year (12 % form you and 3% from employer) and all of a sudden your ending balance becomes $460,000 = about $18,500 per year.

The downside to the DC plan is of course if you are too conservative or the market dips just before you plan on retiring (and your haven't rebalanced), your ending balance might be too low and you end up working longer to make up for your choices or the bad market. Another downside is that a DC plan can run out of funds if you don't plan well (this is why 4% per year in withdrawals is recommended...you keep your money working and 4% is usually less than your appreciation, so you can continue to grow your money). The upside is if you get say 10 years of 12% returns (like we did in the 90's - I ran the data with 10 years of 12% returns in the middle and the $459,000 jumped a bit to $472,000 - a bit more per year.

The worst part of all of this is that 401(k) contributors are now expected to take the reins of their pension - a job many aren't suited for.

This is all about education and planning.

Neither Suck...

Although you could mismanage your 401k... Or the Volatile market marginalizes your returns for you.

A Pension, depending on what option you chose to takes distribution's,..whether they end when you die(a man), or continue till your spouse Dies can Greatly effect the outcome.Choose the later,..unless maybe you both have pensions,..Not a likely occurrence.

That's if you were lucky enough to work at one company for near to 30 years.

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At the end of the day.... with all things considered.... a 401K is better than a pension.

(BTW: Most pensions make most of their money from the stock market.... they pay you a small amount & keep the "real" profit).

Pensions are fine if you work with one company for 40 yrs. If you job hop, like most of us do, then pensions are WORTHLESS. 401k's are portable (from job to job), pensions aren't.

I'd rather have a pension. I have to put 15% of my own money into a 401K.

you must have seen the Rachel Maddow show last night