The Value of a Defined Benefit Pension Plan Rediscovered

One of the great financial scams of the last thirty years has been the replacement of traditional (Defined Benefit) pension plans with 401(k) plans. Somehow, the financial industry and a whole host of businesses have been able to convince their employees that this was good for them. Instead of a guaranteed lifetime retirement income related to their pre-retirement income funded by their employer as provided by a traditional Defined Benefit plan, they got to fund most of their own retirement from their own paychecks with little of the expertise needed to determine how much funding it would take and frequently without the necessary discipline to make it happen. As an extra “bonus” employees acquired the responsibility for managing the investment of their retirement savings–again without the necessary expertise and discipline. And, for the most part employees were convinced that this was a good deal.

Now, as this article written by Ed Frauenheim points out, more employees may finally be figuring out that it is not a good deal.  In the quest for acquiring and retaining valuable employees, employers may have to rethink the shape of their retirement benefit plans.

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