It seems to me that the employer will fund it either way. Maybe I’m misremembering stories of pensions being mismanaged and lost. I think the most important thing is that the employer actually does something to fund a retirement, in my way of thinking the 401k approach puts me in control of the money so I don’t rely on someone else to not fail.
Whether it’s promised bonuses, stocks, or retirement funds, my motto is always “show me the money”, and I’ll believe it when it’s in my hands.
In theory a pension is stable, guaranteed income. The employer promises a monthly or annual payment for life, and they manage a pool of money to make sure you get that payment regardless of whether the market goes up or down. People like stability.
With a 401k you take on the market risk yourself. If the market tanks (2000 and 2008 come to mind) then your retirement funds are suddenly worth less and your payments to yourself (distributions) go down. Of course, if the market is hot you can also direct your investments to try and ride the wave. Greater risk means greater (potential) reward.
401k’s also have required minimum distributions that kick in as you get older. If you live long enough you will reach a point where you have been forced to drain the whole thing into your regular bank account. Then it’s time for another plan.
Yeah, I remember my parents talking about how badly they were hit in the late 00s. They were considering retirement just as the recession struck, and they lost a huge chunk of what they’d hoped to retire on.
They still haven’t retired fifteen years later despite declining health.