Why a 401(k) is Better Than a Pension

The degradation of pensions is a disgusting by product of big business greed and unfettered capitalism.

My friend was a teamsters. He retired comfortably 25 years ago
Fast forward to today he has never received an increase in his pension payment. Due to inflation, he now has had to go back to work part time because he can't pay all the bills. 😢

So, how big does a 401K have to be to get 10k a month until you die?

Daves a businessman..what do we really expect him to say..yeaaa pensions are great im gonna pay for my employees to have on lol 😅

Railroad retirement in 18yrs which should be ~8k for me and 4k for my wife each month. Railroad retirement pays your wife a separate check to her for 50% of whatever your amount is. Couple that with a maxed 401k, 10% into company stock with a match, and a maxed out roth ira...were gonna do just fine. We also dont pay into social security.

The reason pensions died out in the 90s was that it was too expensive for companies, not that the 401(k) was somehow a better investment vehicle for individuals. Those massive liabilities on a company's balance sheet in having to guarantee payments to individuals who won't die just destroys a company's financials, whereas the 401(k), even if there is a match, is a known outlay of money each month to a company that is manageable. Dave's argument here is not all that great. There are definitely reasons why a 401(k) is better than a pension (money doesn't go away when you die, although that's really not a benefit for you but rather your heirs), but there are also definitely reasons why a pension is better than a 401(k) (I can calculate EXACTLY how much I will receive each month, depending on when I retire, how much my salary is, etc.). Now if you're lucky enough to have a pension, you should also be investing in a 403(b) or something like that, but that's a different discussion. It's kind of a bizarre take honestly...it's just math.

Anyone saying a 401K is better than a pension hadn’t studied the pension benefit levels offered by many states, especially those like New York. Your $1 Million 401K at age 65 will buy you a full life annuity that pays about $5K a month for life starting at age 65. And we need to talk insured annuities to level set on the pension’s clear advantage of guaranteed income regardless of market performance.

So a million bucks in 401K is $5K a month. A state worker whose ending salary was $7K a month will usually have a pension of $5K a month, starting about 10 years earlier, like age 55! So the cash value is closer to $1.4M. Now, how many people earning $85K per year at age 55 have amassed a 401K worth $1.4M?

I think Dave’s too focused on “the equity is yours” argument in favor of 401K. And if you prize passing down an inheritance — especially if you die young — then 401K has that advantage. But if you consider how rich many state pension systems are (usually adding retirement health benefits worth $$$), and you’re focused on your own retirement lifestyle versus the size of your will, then pensions win without contest. Now, if you don’t have a pension, because your company unethically ended the program years after you began employment (state programs are constitutionally protected), at least you get to fund your state-worker neighbor’s retirement security in your tax payments.

In the years ahead, retirement will be a story of the public-sector “haves” versus the private-sector “have nots.” The median kind of state worker making $60K a year will retire at age 55 and enjoy a $4K a month pension, plus health benefits for life, plus social security. While the company guy topping out at 60K a year and was lucky to invest $8K annually incl company match, will retire at age 65 on social security, basic Medicare, and a retirement account worth $300K. So, would you rather have $300K that’s yours … which you can annuitize to $1.5K a month for life, or a $4K monthly income for life guaranteed but no access to any equity? That’s the question.

Bunch of crap. My pension pays me $90,000 a year. My pension fund is over $400,000,000,000. I contributed about $235,000 towards my pension during my 30+ career. If I die first my wife still receives 65% of my pension. On top of that our combined benefit is $50,000 a year from Social Security. I retired at 62 and have been collecting my pension and Social Security for 10 years. If I had contributed the $235,000 to a 401(k) I would not ever get the same benefit as I do today. Just a plug for private companies who don't want to give their employees a pension.

I work for a municipal that is city owned, in the utility department. We are unionized and they offer 30 years at any age for 2.0%. I'll be 57 when i retirr god willing! Shit i might go at 52, after 25 years... I'll get 50% of my highest 3 years. Shoot for the stars folks!

Kentucky taxpayers are forced to match 30% of salary to the public pension system. 30%! And we still have $44 billion dollars in unfunded public pension liability. It's beginning to show in the economy. It's not going to end well.

Whats better than a 401k. A pension and a 401k.

The only issue of a pension vs a 401k, is that a pension was automatic(like SS). The employee did not have to do anything other than work. With the 401k, you had the one issue that hits all voluntary programs. People do not voluntarily contribute(50% do not plan for retirement, or cant give up the money at this time).. And contributions are the single most important part of the 401k effect. Like IRAs, if you do not contribute, you end up with nothing. So a pension is better because 50% of the people take no responsibility for their future. However, I contributed to a 401K as soon as I could and at the time, it was 1 year after I started work with the company).

Pensions are vastly superior to 401k's ...why should something as important as your retirement be subjected to the risks and the shenanigans that take place in the stock market. Dave Ramsey is an idiot and an abusive employer

It's recommended to save at least 15% of your income in a 401k. You can use online calculators to estimate how much you should save based on your age and income. Saving at least 15% of your income in a 401(k) can help ensure that you have enough money to retire comfortably. By saving this much, you can take advantage of compound interest and potentially grow your retirement savings over time.

401Ks have made more millionaires than defined benefit pensions? Yah. So what? You accrue millions in your 401K so that you can draw an income from them. A pension is an income that doesn't require you to have millions. In both cases, you get an income. But a pension is a guaranteed income, which is inflation protected (for government, anyway), and investment income is not, which has been an important distinction in the last couple of years. As for me, I am fortunate to have both. I retired last year at 60 after 40 years of military and fed public service and started drawing a pension. Plenty enough to live off of with some travel and other luxuries. I have yet to draw a penny from my investments, because I have been waiting for them to get back up where they were in January 2022 - before Putin's war and before central banks started quantitative tightening to deal with inflation. If I didn't have a defined benefit pension, I most likely would not have retired.

lol … Yeah, right. 🤣

Gotta say you’re full of BS on this topic Dave Ramsey. Everyone in a pension system also has access to a 401k, 457b, etc. The latest study found that the average 401k balance of a 65 year old retiree is $198k. Most government pensioners will collect over $800k from pension alone in their retirement years. You’re not even accounting for health benefits which a large majority of pensioners get for free or very low cost, versus the 401k retiree who must pay full premium healthcare prices in retirement.

XOM currently has traditional & roth 401ks, with a 7% match. PLUS a pension. But now theres rumors of trying to eliminate the pension and drop to a 5% match😢

Thanks for increasing my knowledge in personal finance and investment, I recently subscribed to your channel. I want to give a big shout-out to all those working tirelessly to earn a living and build wealth during this recession. My husband and I are both retired and debt-free, and we're living smart and frugal with our money. Despite the recession, we're still earning passive income thanks to our savings and investments in the financial market. Investing lifestyle has enabled us to earn a steady monthly income through passive means, and we're grateful for it:;

My pension took a hit after the local government reduced all pensions. I also have a similar plan as a 401k but very different, have close to a million in it currently paying an interest rate of 5.5 %
Pensions are great until they reduce it or take it away. Oh well..😊😊😊😊

Ideally having a pension and 401k is superior

Who gave the most annoying uncle at thanksgiving this kind of platform

I lost my 401k 4 times

Dave Ramsey is the kind of guy who would cross a picket line.

a 401k is never better than a pension... Pension is completely and 100% guaranteed retirement fund that you do not have to contribute to. A 401k can be mismanaged, you have to contribute to it and you could retire during a downturn. A government pension won't go away, and a public sector pension is backed by a federal fund and will not go away.

Pension are reliable on the state and municipal level

@45 years old, I am fortunate to have a pension w/ COLA after 25 years of service on top of 2 properties for passive income; living overseas now to slash Cost of Living by 50%;
All is well.

USAA had a 401k that would match 8% , they just dropped it to 4% match but they reinstated the pension. I took advantage of 8 years doing a full 8% match . Overall I’m happy with both the pension and 401k .

My mom has a pension! I have a 401K . She is a millionaire. I am going to work for the government!

Retired with Chevron in 2016 after 25 years, with Pension and 401k! I’m thankful…Major Oil and Gas companies still have Pensions.

Well I'm in the union and we have a pension and an annuity the annuity is just like a 401k it's variable and when you retire you can leave it in their fund or roll it to a traditional ira I think the goal here is to have multiple sources of income I'll have the annuity 2 pensions and social security and possibly rentals...there are more than one way to skin a cat if you can make what your making now when your retired and everything is paid off I would say you did pretty good 👍

But why did they stop the pensions? I wonder?

This is like saying it's better to gamble at the casino than to hold down a steady job lol. Sure, casinos have made more money for a few people than most careers, but they have also bankrupted a lot more as well. Pensions should be brought back for every worker, if you spend your life making somebody else rich, it's only fair that they take care of you later in life.

I'm convinced that big businesses give him money to puppet their bs

I get my wages … I spend my wages ….. I get my wages …. I spend my wages


I repeat …. I’m 47 and have a great life … my mind is sharp and I ain’t gonna change ❤❤

Good luck ❤❤

Ramsey is a moron. He is right avmbiut not having debt and living below your means. But in 2023 he says sell your gold and buy a house. My firefighter pension is backed by the taxpayers. Lol. So until the state defaults, I get my money...

That seems very top-heavy just because they make more millionaires doesn't mean that the people in the middle or actually sustaining their way of living or cost of living so I believe your stat is very misleading

The issue with 401k's is nobody knows how long they'll live. Youre getting a fixed amount of income but who knows how long you'll be retired.

Get a federal job and you can have both. TSP with a free 5% match + a pension starting at 57-62 worth 1.1% of your high three year average * years of service. All of that on top of making 60-80k per year in the back half of your career. It’s a no brainer. 😮

Investing in Roth IRA can be a good choice since they are funded with after tax dollars, your contributions can grow tax-free over time. When you withdraw money from your Roth IRA in retirement, you won’t have to pay tax on it, which will help you keep more of your hard-earned money. Compounding is the process of earning interest on your initial investment, as well as on the interest that investment earns. This means that over time, your investment can grow exponentially. So the earlier you start investing, the more time your investment has to grow through compounding.

The fact of the matter is that “typical” blue collar Americans working for lower to middle class wages were able to retire on a pension and live comfortably until they died. Nowadays the same level workers don’t have enough money to aggressively contribute to a 401k and ultimately retire with very little. The fact that 401k has made more millionaires than a pension is irrelevant. Not everyone cares to be a millionaire, they just want to retire knowing they are secure financially.

Pensions in the North East are over 6 figures.... do your homework.

What if your company offers both?

FedEx just gave us the choice to keep our current pension or double the match contribution to the 401k

Pensions are fine. I retired with a good one.

You can’t outlive a pension as it pays you for life. If you’re not careful, you can outlive your 401k. Not everyone becomes a millionaire by way of 491k.

you don’t get to control the rate of return in a 401k.

If u have a pension most likely can also have 401k or 457 plan best of both worlds

Dave Ramsey seems not to grasp that, being in charge of your retirement savings, when you know nothing about finance or investing, doesn't work very well: You don't know how much to put aside, you don't know what to place it in, and you have no idea how to react when things go poorly (or well). Defined-contribution programs, for most workers, probably are a poor alternative to the defined-benefit/pension system, excepting when businesses or governments do not adequately fund the latter -- read, when laws are not in place to aggressively penalize them for failing to do so.

Boy this aged well. Look at what's happening now...