Risk of funding retirement shifted from employers to employees under 401k plans

Evidence

The best type of retirement account, the defined benefit plan my father had, is increasingly a relic of the past. (Remember, it guarantees a retirement payout regardless of the amount contributed, which means the employer takes on the risk of how the funds are invested, putting the financial burden on them rather than on the employee.) The most common type of retirement plan available today is the defined contribution plan, most commonly referred to as a 401(k): If your employer sponsors one and you decide to participate, you agree that a certain portion of your salary will be placed, tax-free, into your retirement account. If you are lucky enough to have an employer match, then your employer will pay additional funds up to a certain amount. However, defined contribution plans only guarantee that an employee will have whatever money remains in the account at retirement based on the employee’s investment decisions. If the employee makes what turns out to be poor investment choices, or is just unlucky, then they will have little to no retirement funds. And while employers often match contributions, the burden of funding the plan remains on employees. If the employees don’t contribute, the employers don’t match. — Dorothy A. Brown, The Whiteness of Wealth, 382

Categorization

• DEFINE: Clear definitional contrast between defined benefit and 401(k) plans, with the risk-shift flagged.
• QUESTION: This passage sets up defined contribution plans for a later tax argument; the racial-disparity mechanism will land in later passages.
• XREF: connects to: 401(k)s shift retirement risk and funding burden from employer to employee; The retirement-account pyramid shifts from employer-funded toward self-funded tiers — Dorothy A. Brown, The Whiteness of Wealth: How the Tax…, 363; The shift to 401(k) plans converted households into stock market participants. — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 54 (+4 more)
• yield-rescued: below the book’s yield-target cutoff, included anyway for connecting to: 401(k)s shift retirement risk and funding burden from employer to employee; The retirement-account pyramid shifts from employer-funded toward self-funded tiers — Dorothy A. Brown, The Whiteness of Wealth: How the Tax…, 363; The shift to 401(k) plans converted households into stock market participants. — Gerald F. Davis & Suntae Kim, Financialization of the Economy, 54 (+4 more)

Broader Connections

• 401(k)s shift retirement risk and funding burden from employer to employee #corroborates (1.00)