Family Wealth blog

Pension? What Pension?

A woman's hands cradle an egg with the word "Pension" painted on it. The title "Pension? What Pension" is in white on a green bar.

In the early 1980s, about 60 percent of private sector employees had a pension plan as their only retirement account. Since then, this percentage has dropped to only about 4 percent. [1] So, who still gets offered a pension today? A sizable majority of state and local government workers, teachers, police and firefighters, union members, and a handful of other job types still offer new hires pension plans. Other than that, pension plans have been almost entirely replaced by 401(k) plans. These, as many are fully aware of now, are influenced by market forces.

Defined Benefit vs. Defined Contribution Plans

Put in the simplest of terms, a pension is a defined benefit plan, generally offering a fixed monthly income for life starting at retirement. A 401(k) plan is a type of defined contribution plan.[2] This is a managed account whose worth depends on the market value of its portfolio. There are, of course, positives and negatives of each type of plan. While the makeup of 401(k) plans used to be solely managed by the employee, new tools now make it possible for professional financial advisors to assist with this important responsibility. The main negative of a defined benefit pension is that, unfortunately, pension accounts can no longer be considered to as guaranteed for life.

Butch Lewis

No, it’s not a comedy duo or a prize fight. Butch Lewis was a pension advocate whose name is now associated with The Special Financial Assistance Program. [3] This is the part of the so-called “American Rescue Plan” intended to protect multi-employer pension plans from cutting or even eliminated pension benefits. [4] It is a somewhat controversial plan. Politics aside, though, it’s another indication that even those who already have pensions can’t be 100 percent sure they’ll receive all the income they’re expecting from it.

Thirty Good Years

The reason we’re even discussing pensions and 401(k) plans here is that, as you may have already heard, the average retirement now spans thirty years, from age 62 to 92. That is a lot of time to cover expenses after retirement. And even if you happen to have a pension in place, it may not be fully inflation-proof. The other challenges of such a long retirement, from a financial standpoint, are that medical expenses tend to increase with age, and options have likely run out for generating new income.

Plan Ahead. Plan Way Ahead.

So, whether or not you have a pension, you should be using time to your advantage for investing wisely and building up as much wealth as you can before you retire. With compounding, the phrase “the sooner the better” takes on more importance than ever. Put another way, make sure your money is working its hardest for you, and for as long as it can. This way, you’re less likely to become too reliant on your pension, if you happen to have one. And, for 401(k) plans, know that you don’t have to go it alone. Ask your financial advisor about your options.

[1] Source:

[2] Source:

[3] Source: Butch Lewis Emergency Pension Plan Relief Act of 2021

[4] Source:

Disclosure: This information is for educational and informative purposes and shall not be considered a specific recommendation. Readers are advised to speak with their advisor at JL Bainbridge to determine their specific recommendations that meet their investment objectives and to review their portfolios. The material being provided is thought to be accurate. However, the information is compiled from multiple resources and may become outdated or otherwise rendered incorrect by new research or corrections without notice.  J.L. Bainbridge & Co., Inc., is not a broker dealer and does not offer tax or legal advice. Please consult your tax or legal advisor for assistance regarding your individual situation. It should neither be assumed that future results will be as profitable or that a loss could not be incurred. For more information related to our firm, please see our disclosure brochures at and

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