Right - I thought a 401(k) was simply a pension though? Did there used to be something else that some companies still offer?

Pensions are known as "Defined Benefit" programs and 401(k)s are "Defined Contribution" programs.

The difference is pretty much what it sounds like. If you had a pension, you knew exactly how much money per year you'd make in retirement (the benefits were agreed to ahead of time). With a 401(k), you know how much exactly you're contributing and how much is in 'your' account, but the value of your retirement accounts in the future is dependent solely on how much you contribute and your personal investing prowess.

As companies and public entities underfunded pensions over the past 40 years, pensions started going bankrupt or dramatically cutting contractually obligated benefits that were to be paid to retirees, so companies began switching to employee-owned plans.

Shifting the burden of investing in retirement to the employees rather than the companies has its benefits but I think we're going to see a lot more elderly poverty as the boomers retire since on average, people are terrible at investing.

Getting a bit off topic, but when we find that people's 401(k) plans are not enough to retire on, we're not going to see more elderly poverty. The elderly vote. We're going to see young taxpayers making up the difference. The move from mentions to self-directed retirement plans is essentially a wealth transfer from future workers to current corporations.

I think that seems optimistic. The elderly do vote, but they consistently vote for people who cut their benefits... Every single budget negotiation results in cuts to medicare and social security, which by definition are cutting benefits to the elderly.

I think you're right on a macro level, the tax burden is being shifted to the younger and less politically active, but based on actual legislative action, it seems defense and social issues are more important to the elderly than retirement benefits.

I believe there were also regulatory changes that made the "dramatically underfunding pensions thing more difficult. (There may have been tax changes as well which drive many things.) Pensions survived in older tech companies for a long time; the company I worked for starting in 1986 had one until its acquisition in the late 1990s. But the pension was fairly modest and it also had the various other 401(k) and stock option plans.

They aren't the same. "Pension" means defined-benefit pension. You work here for 25 years and you'll get x thousand a month in retirement. It's how retirement plans worked up until 1983 or so. 401(k) means market-based investing. You put y percentage of your paycheck aside, and the company may contribute some money, and it goes into Wall Street tax-deferred to hopefully gain value.

A lot of older tech companies used to, but pensions are gone now.

For IBM, any accrued pension remains in a managed fund until you quit/retire. Most employees had a 401k option at the same time as a pension - you pay 6% of your salary into it and the company matches half that, another 3%.

If you didn't make the pension cutoff, IBM now matches the 6% plus some more depending on what date you started. I think it comes out to something like 14% of base pay for most employees. In a 401k, the individual has much more control over investment direction, whereas with a pension you had none.