If you have a pension, you're part of a shrinking club.
Only about 15% of private-sector workers still have access to one, according to Bureau of Labor Statistics data, down from roughly half in the early 1980s.
Everyone else mostly gets a 401(k), and the difference between those two retirement paths is bigger than most people realize.
Your employer (or your union, or the government) agrees to pay you a set amount every month for life, usually based on your salary and years of service.
You just show up, and the check arrives until you die.
You and your employer put money in, you pick investments, and whatever happens next is on you.
If the market tanks the year you retire, or you live to 95, or you panic-sell in 2008 and never get back in, that's your problem.
The upside is real — you can leave a 401(k) balance to your kids, and a pension usually dies with you.
Here's the part that trips people up: a pension isn't automatically better.
Plenty of pensions have been cut, frozen, or handed off to underfunded insurance backstops.
Detroit city workers found that out in bankruptcy.
So did thousands of retirees at companies like Sears and Kodak.
A "guaranteed" check is only as good as the institution behind it.
Many employers who killed their pensions replaced them with 401(k) matches that are far less generous.
A traditional pension might have been worth 6% to 8% of your pay annually in retirement value.
That gap doesn't show up on your paycheck.
If you're offered a choice between a pension and a 401(k) — some public employers still do this — the lazy answer is "take the pension." The smarter answer involves questions.
Do you expect to live a long time, or is there a family history of early death?
Do you have a spouse who'd need survivor benefits?
A pension is often worth more to a long-lived, risk-averse worker and less to someone who changes jobs every three years.
For 401(k) holders, the biggest enemy isn't the market.
A 1% annual fee can eat hundreds of thousands of dollars over a career.
Auto-enrollment helps, but auto-enrollment at 3% isn't enough.
Most planners suggest 15% including the match, and even that assumes you started in your 20s.
The uncomfortable truth is that the shift from pensions to 401(k)s transferred risk from employers to workers, and nobody asked us.
The generation that got pensions is mostly fine.
The generation that got 401(k)s is now finding out what "you're on your own" actually means in dollars.
Our take: don't romanticize pensions or panic about 401(k)s.
Final Thoughts
Read your plan documents, know your fees, and figure out what monthly income you'd actually need to survive.