Source: Scott Tong, American Public Media, Marketplace, June 13, 2013
…The rise of the 401(k) and the fall of pensions
Big companies offered them first, and in the meantime started ditching pension plans, which were expensive. And before long, “401(k) became very popular for little companies to have, that never had any retirement program,” Benna said. Thus began the era of make-your-own-retirement. The American worker now faced a new choice: Spend my whole paycheck? Or take the employer match/bribe, and start saving? It made for some tension….By the mid ’90s, 30 million Americans had 401(k) plans. Do-it-yourself retirement seemed easy in the decade’s bull market….
…We know what came next, in 2000: the dotcom bubble burst. Then, in the financial crisis, the average 401(k) plan tracked by Fidelity Investments lost 27 percent….Today, the typical middle-class household nearing retirement has saved $120,000 — one-tenth what many say it needs. …
…It was never Benna’s idea for do-it-yourself to replace pensions. It just kind of happened…. Benna says the 401(k) was never meant to take care of everyone. It was simply a financial product that took off. …