joedirtty wrote:
The whole idea that 401Ks are in some way evil is insane and is perpetrated by government and union employees with defined benefit pension plans that are a far better deal in terms of tax deferred investing (they just don't have the financial literacy to understand that is where their retirement comes from). They claim only rich people have 401Ks, but the truth is these union blowhards have far more cushy deals. Most of those pension plans do not have the contribution limits, have a much higher employer match and some do not even have to pay into the failing social security system. All are invested in a similar variety of financial instruments. Any time their plans are mismanaged they plead for the tax payer or business owner to bail them out. Considering people with 401Ks also have to pay into a broken social security and medicaid system (that the government refuses to fix and some pensioners do not have to pay into), that will pay out far less than if the monies were invested in stocks and you start to get an idea of who are the ones with a better deal. If they are going to tax the 401Ks that the rest of us get, then they better tax the pension plans that they get.
As an employee benefits lawyer with 40 years in the industry, I think there is zero chance that 401(k)s will be eliminated. However, there is a lot of incorrect information your post.
Many state and local governments have switched to defined contribution programs for ongoing pension contributions, and their defined benefit plans have been frozen or allow contributions for a grandfathered group of employees aging out of the work force. And some of those entities use the governmental version of a 401(k), the 457(b) or, for teachers, the 403(b).
Union employees working for private companies also pay into social security, as do some governmental employees.
Pension plans for union employees working for private employers do not have an employer match, and the level of contribution is controlled by the collective bargaining agreement. They do not tend to be generous as compared to the limits for 401(k) plans.
As for investments, I am part of a large group of attorneys at my firm that handle the legal aspects of investments for government and multiemployer plans covering union employees of private employers. While those plans purchase annuities and guaranteed investment contracts, most of our work involves investing assets in private equity funds, private real estate funds, individual real estate investments (debt and equity) and other alternative investments. These plans also tend to have large investments in publicly traded stocks and bonds.
Private employers don't bail out troubled union pension plans because the members beg them to. They don't pay any more than required by the collective bargaining agreement, their subscription agreement with the plan, and the relevant law. I agree that taxpayers can end up getting a raw deal when public pension plans are underfunded.