Earlier quoted context omitted.
>So we are still equally reliant on employers as the facilitator of access to a retirement benefit. Functionally it’s truly not different than pensions, only the underlying financial instrument is different. No, 401K pensions are 'defined contribution' systems; you put in X, your employer puts in X/2 (or whatever it is they decide. X/2 is common in my area, but as you point out, some lower-end employers contribute no…
My comment was that even though 401(k) plans are defined contribution plans and are very different than pensions, most people are still dependent on their employer for access to them and there are laws severely limiting what you can contribute outside of payroll deductions via an employer, Roth vs traditional, one-time roll-overs, etc. It’s still just as tied up with employers as before, even though the instrument fu…
I mostly disagree? Mostly. If you don't make a lot of money, you are gonna have a hard time putting away more than the $5.5K or so that a conventional IRA limits you to. (and if you don't have an employer plan, setting up a conventional IRA or Roth IRA for that $5.5K is super easy)
If you make enough that you can put away much more than that, you probably either have an employer who gives you access to a 401K OR you have something like a business. If you have something like a business, talk to your tax professional. (if you make enough money that you worry about this stuff, you need a tax professional. I suggest looking a the 'enrolled agent' license) - There are tax advantaged retirement plans for the self employed that let you put away a lot more pre-tax than the $18.5K that a 401K will let you put away. Ask your tax person about the 'SEP IRA' - there are other plans, and I'm not qualified to guide you here, so ask your tax professional, but there are a lot of really good options for the 'self employed but making a lot more money than I need to live on' set.
(note, dollar amounts are approximate, and probably out of date. again, if you have a business that does significant monies, talk to a licensed tax professional, not a computer technician who burnt out running a business a while back)
>I’m not saying 401(k) is the same as defined benefit at all. Only that the move towards defined contribution plans has not actually decoupled retirement plans from employer intervention in any meaningful way. Employer control is roughly just as it always has been, only now employees are forced to bear the risk of the underlying assets, instead of compeling the employer organization (which is far more capable of absorbing risk and riding out downsides) to bear that risk.
I think the fundamental difference here is that with a 401K, I have to trust my employer a lot less. I agree, of course, with your point about risk, that with a 401K, I am taking on a lot of market risk, risk that a company is better setup to handle than I am. However, key here is that with a 401K, my fate is no longer tied to the companys fate. If the place I work for goes tits up after I leave (which has alrealdy happened to me a few times, I hope through no fault of my own) with a 401K, it's no skin off my nose. With a company defined-benefit pension... it is a much bigger deal for me.
(As an aside, I personally think a government old-age pension that isn't dependent on your income is the rawlsian thing to do here. I'm just pointing out that in the fight between the 401K and the private-company defined-benefit pensions, there are real differences and real arguments in both directions)