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Originally Posted by Thrif-t
uh, not...but I am only working part time now. And if this is to be our retirement (replacing pensions) why aren't they required to match? I think they should as well as raise the match every so many years. I mean people who only make 20k-25K/yr aren't going to get anywhere putting 10% or 15% of their pay away without a substantial match.
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It makes sense that the overall effect of a 401(k) should match that of a pension plan, but it's just too difficult to get this to happen. Unfortunately, employers are more concerned with their bottom line than they are about the financial security of their employees. Therefore, most often they "back into" the matching % based on their budgets ... not based on how well it will help their employees prepare for retirement.
BUT, you'd be suprised at how close a full 6% match on 401k contributions will come to the average Pension benefit. A full 6% match is generous by today's standards and does quite well at replacing the benefits of a pension plan over an employee's "life-cycle." Plus, you have to factor in a premium for the mobility of 401(k) plans, the ability to choose your own investments, and generally lower vesting requirements. In your example of working for the same employer for 19 years, you're correct that a pension benefit would be better. However, that's not the standard any more. These days, people move around quite often ... and for them the 401(k) benefit is better.
Regarding people at the lower end of the salary scale ... they don't have to sock away 10-15% of their income. The rest of society is compensating for their inability to save for retirement through Social Security. A person earning 20k when they turn 65 can expect Social Security to cover about 69% of their pre-retirement income. Meanwhile, a person earning 70k will only get about 42% of their pre-retirement income from Social Security. That's just the way Social Security was designed ... for better or for worse!