3. The Extinction of the Traditional Pension
Forty years ago, the three-legged stool of retirement income consisted of personal savings, a company pension, and Social Security. Today, that stool is missing a leg. The massive corporate shift from defined-benefit plans (pensions) to defined-contribution plans (401(k)s) transferred the burden of investment risk entirely onto the worker.
Because so few workers retiring today have a traditional pension to rely on, Social Security has had to step up and act as a replacement. It is now the only steady, predictable monthly income most people receive.
| Feature | Traditional Pension | 401(k) / IRA | Social Security |
|---|---|---|---|
| Funding Source | Employer | Employee & Employer | Payroll Taxes |
| Investment Risk | Employer bears risk | Employee bears risk | Government-backed |
| Inflation Protection | Rarely adjusted | Dependent on market returns | Annual COLA applied |
| Longevity Guarantee | Usually lifetime | Can run out | Guaranteed for life |
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