General Discussion
In reply to the discussion: 401Ks are a disaster: Column [View all]FarCenter
(19,429 posts)Pensions were designed to put the "golden handcuffs" on employees by increasing the amount of the pension benefit per year for later years of employment and by basing the benefits on the last several years of employment.
Which means that even if you stayed long enough that your pension benefits were vested, you got squat because:
- you had few years of service,
- the early years of service carried only a small percentage benefit, and
- inflation between when you left the company and when you could start to collect made the pension very small (particularly if you left in '75 and the late '70s inflation eroded half the buying power of a dollar).
And you had to stay even after you hit vesting (which used to be 10 or 15 years), since your remaining work years at another company wouldn't give you much pension to add to the vested pension. This kept people working for crappy companies.
Then the crappy companies would go bankrupt, and people who had 20 years of service and were age 45 were truly screwed.
401Ks are portable, but you have to invest in a balanced portfolio, avoid concentration in your company's stock, and contribute at least 10% of your salary to max any matching company contribution and then some.