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View Diary: Middle Class Dies Twice in Detroit (63 comments)

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  •  So, in a defined benefit plan, if the plan (0+ / 0-)

    has big problems you are left holding the bag - the plan sponsor usually does not have the money to make you whole and was probably under-contributing anyway.

    Sounds just like a 401K.

    On the other hand, if the plan does well - if the investments do well - with a defined benefit plan, the sponsor can reduce its contributions and even claw back some cash as long as there is enough money in the plan to allegedly pay you your benefits (see first point).

    However, with a 401K, if your investments do well you keep the gains.

    Seems like in practice a 401K wins.

    •  It's exactly like a 401K... (2+ / 0-)
      Recommended by:
      peregrine kate, Paul Ferguson

      ...If a 401K promised to make up underperformance by the investments in order to ensure that you would have a minimum income.  On the other hand, if their investments perform well, they profit.

      ...So not at all like a 401K.

      Given the number of news stories about how the great number of people with 401Ks are financially fucked, I'd say that, in practice, 401Ks don't win either.  They're just a way to extract rents from the proles while absolving anyone else of any responsibility whatsoever.  Sure, occasionally, people with 401Ks luck out and do very well.  But that doesn't seem to be a particularly common occurrence.

      •  If you just put your 401K money in an index fund (0+ / 0-)

        you do fine.

        If you like to gamble, well, you win some and you lose some but the house always wins.

        •  Not all of us have index funds as an option (0+ / 0-)

          Investment choices are made by the corporation, not the employee.   Often extremely limited when it comes to index funds.  Back in the early days  for many employees the only choice was investment in company stock --- remember ENRON?

          The corporations hold all the cards when it comes to what you get to invest in.  Don't I wish I'd had the option of an index fund way back when -- 'cause it's too late to make up the losses now.  

          Comfort the afflicted. Afflict the comfortable.

          by FindingMyVoice on Thu Aug 01, 2013 at 11:05:15 AM PDT

          [ Parent ]

          •  Plenty of Enron employees were not 100% in (0+ / 0-)

            Enron stock - they had other options.

            I'm pretty sure you never had 401Ks that only had employer stock as an option at least since I started paying attention to such things in the early 90s.

            Can you document that this was an issue post 80s?  Or even ever?

            •  Company running the 401k gets to choose (0+ / 0-)

              investment choices for participants.   My Fortune 500 employer just added 3 index funds as an option 2 years ago.

              It's not a level playing field where participants can put their money into whatever investment they pick, the way an IRA works.   I'd never willingly chose some of the investments offered in my 401k on my own because of the high fees & because I damn well know there are better choices out there.    My partner's 403b plan is the same -- you have to invest in whatever the plan managers pick as options.   Matching funds, if it's offered, is the big benefit for 401k participation, with luck it'll mitigate the fees & often sub-par performance of the offerings.

              Glad everything is working out so well for you - we should all be so lucky and well-informed!

              Comfort the afflicted. Afflict the comfortable.

              by FindingMyVoice on Fri Aug 02, 2013 at 07:36:12 AM PDT

              [ Parent ]

    •  401ks are OK with a strong Social Security system. (0+ / 0-)

      I wouldn't want to solely depend on 401ks though, and I'm a much better saver than many.

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