Since pensions have been brought up, I'll offer this.
In the US most companies stopped offering defined benefit pensions and now most do not offer pensions at all, but use alternatives, and I consider that a positive change. I'll explain why. Although pensions are insured in this country, that doesn't cover market losses or bad investments. Many companies invested in themselves through pension funds. So, not only was your livelihood tied to the company, your retirement was also. I strongly prefer the move to 401-K's and similar funds. In those, the money is yours as the employee. The investment of that money is also up to you. You have control. You're not at the mercy of a company with self interests risking your retirement savings.
The worst misuse of retirement funds I quickly recall was Enron. The same lies management was giving the public, they were giving employees and employees had their entire retirement tied up in Enron. When Enron was busted, so were they. I frankly feel the executives of Enron should have been charged with murder of all the employees who seeing their life savings evaporate and committed suicide. Was it not reasonable for them to foresee that as a likely result of their lies? White collar crime doesn't just hit the wealthy. It hits us all. I think the most serious white collar crime which robs thousands or hundreds of thousands of people should be considered just as serious as assaulting someone. It destroys lives, it takes lives. Jeffrey Skilling only served 12 years and was released last year. His victims are still imprisoned in a very different way.
In a perfect world I would agree with you. But... This is not a perfect world. Saving in a 401-K even when money is tight, and not continually borrowing against it, and not cashing it out when you switch jobs takes discipline, something many, no, I’ll say most Americans do not have, especially in their younger years.
That’s not even considering the idea that many, no most folks stay invested far too aggressively in the market, way too late in life and fail at their goal of retirement when a market correction occurs near their planned retirement date.
In my opinion this results in far less savings for many than actually needed to lead the life they want to lead.
That is the beauty of a defined benefit plan. You cannot touch it. No matter what you do in life you will still have that pension. You do not get to choose how it’s invested, so you will not make mistakes. Plus your employer paid 100% of the cost.
This should be coupled with other sources of income. I think retirement financing should be a multi tier strategy. I think that too many people only think of one thing, and if that one thing has a problem they suffer greatly through their most vulnerable years.
The tiers if possible might be...
Defined benefit pension plans
401-k savings plans
Rent free living through home ownership
Social Security
Use of your homes value if necessary
Equity in a business entity you spent years building
Real property, IE rental properties
Being a guy that is right at retirement age I san say that the value of my defined benefit plans exceed the value of my 401-k holdings, and I have been in matching 401-k plans for most of my career. Yes as a younger person I made some mistakes, like many do... That’s the risk of 401-K plans.
We all have examples. I have many old work aquatience buddies that are working late in life due to them thinking they knew the market better than the professionals and lost much of their 401-k values. I have other friends who used their 401-k money and their home equity to fund lifestyle. I work with a guy that is almost 59 years old and is borrowing against his 401-k to buy siding for his new shop.
A couple of those examples also had defined benefit plans. Between those plans and their Social Security they do pretty well though, even after their costly lack of discipline mistakes. A buddy of mine lives in the Florida panhandle a couple blocks from the beach. He was a prime example of someone that would be in a VERY difficult position if it were not for his defined benefit plan. He retired at 58 with basicaly zero net worth, but had a defined benefit plan paying a bit over $4,000 per month. Between that and his social secirity he can make the mortgage on his home and get by pretty well.
