Defined pension or 403B/401 with match?

[lee1]

Which do you think is better in the long run for you of the above??? Defined retirement benefit where union or employer provides monthly defined money at retirement until death or deferred 403/401 account where employer makes match of up to 4-6% but you save majority of money????

[sjoe]

The answer depends on a LOT of things.

When would you be vested in a defined retirement plan? Do you plan to work for the same company until you retire or die? Do they plan to keep you on that long? What happens when that company gets bought out by another, and employee pension benefits are wiped out (now permitted by federal law)?

On the other hand, would you wisely invest money you have in a 401(k) or would it likely be wiped out in the next stock market drop? What investing options would you have? When would you be vested regarding the emloyer's matching contribution? It is usually a good idea to maximize your 401/403 deduction, if for no other reason than to defer taxes.

Generally, one is better off doing a 401(k) or 403(b)--then choosing a WISE place to invest it.

If you need more info than that, you would do well to hire (per-hour, NOT on commission) a financial advisor and spend 30 minutes or an hour with him/her getting personalized advice.

[llg, PhD, RN]

I agree 100% with sjoe. I've changed jobs more than a couple of times in my career and I had I not had had 403B's that I could roll over, I would be in deep trouble. Those defined benefit plans only work for people who spend all (or at least most) of their careers working for the same employer because they are usually not portable.

Also, with defined benefit plans, you have to be careful how they "define the benefit." For example, some plans base your pension on your last 5 years of employment ... or 10 years ... or whatever. That means that if you want to phase out of employment by working part time for a while before you retire, those full-time employment years are forgotten and they base your pension only on the part-time years. Now, that's not true for every employer ... but you have to watch out for that sort of thing.

In essence, I trust myself to manage my money far more than I trust my employer.

llg

[oramar]

Almost noone spends their whole work life at one place anymore, so traditional pensions are a problem for job jumpers. However, a lot of us that had the 403b and 401k type of pensions found out what can happen when those get mismanaged. Oh wait, I think I just repeated what has already been said by previous posters.

[llg, PhD, RN]

Originally posted by oramar

However, a lot of us that had the 403b and 401k type of pensions found out what can happen when those get mismanaged.

Yes, when you have a 403B or a 401K, you have to manage them yourself and choose your investments carefully. The responsibility for managing the funds usually falls onto the employee, many of whom are not prepared for that responsibility. They ignore advice such as "diversify" and "don't gamble with money you can't afford to lose," etc. and take chances they can't afford to take. That's why all of us need to educate ourselves about investing and managing our money.

llg