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URL:  http://boards.fool.com/when-we-replaced-corporate-pensions-with-iras-and-30771054.aspx

Subject:  Re: Proposal to end public pensions Date:  7/11/2013  1:12 PM
Author:  rharmelink Number:  428500 of 464958

When we replaced corporate pensions with IRAs and 401(K)s in the private sector during the 70's, 80's and 90's, the results were horrible. We now have an army of U.S.'ians who have neither pensions nor sufficient savings upon which to retire.

I have to disagree with that. But plans varied significantly.

Since 1979, I always maximized my 401K contributions. I worked full time from 1979 to 1993. Part time (20 hours mainly) from 1993 to 2006. And had enough to retire on from my 401K contributions. Although FICA got more contributions from my income over those years than my 401K did.

But we had a good company 401K plan. They half-matched the first 6% of our contribution (which far too few people took advantage of). Good choices for mutual funds (about 20 or so), with no fees for switching around as long as it wasn't done excessively. Even an option to do a self-directed account.

The reason USians have no retirement savings is because they chose not to save for retirement. For example, one year we had a nice profit-sharing bonus. It was about 30% of my annual salary. I left it ALL in the 401K. But we did have the option of taking up to half of that in cash, and MOST of my co-workers did. A lot of new cars, new dining room sets, kitchen renovations, etc. Many of these same people were maxing out credit cards and credit lines, so they could live beyond their means. Borrowing against the future, instead of saving for it.

That's probably the one good reason for FICA. Forced allocation. Without it, there would be little or no money going to (someone's) retirement income. But it's more of an income redistribution plan than it is retirement savings plan. And it looks like it will get to be more that, as they add more and more needs-based rules to it.
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