How does the pension system in USA work? Do the companies pay you a small salary after you retire? It reads like that. In that case, what about the place you worked until you were 40, are they still on the hook? What if the company closes down?
In the case of pensions, they will vest over time and people would receive benefits matching their vesting level. If a company shuts down, the pensioners are creditors of the company and there is some kind of bailout system (I guess basically a federally run reinsurance program).
[1] https://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corpo...
It was real, but mostly only for the high born, the nepotistic, people in the "correct" church, and the backstabby. And of course white males only, hahah that almost goes without saying. It wasn't quite as amazing as people thought, but those who benefited sure did enjoy it.
All professional jobs offer pensions, I'm sure. Including all the major tech companies.
You have the "opportunity" to contribute to a 401k, and if you use the company's (poorly run) 401k option, they may decide to match up to a percentage of your contribution.
For instance, I contribute 10% of my paycheck towards the 401k, my employer matches 4% of that. That's it. And I work in IT for a Fortune 500 company.
What he is suggesting is that he can contribute 10%. Everything he contributes up to 4% is matched by his company (ie a 4% pay increase). Usually its a little more complicated than that. Like they'll match 1:1 the first 2% and then 1:2 the next 2% for a total of 3% matching funds.
In Norway there are no matches. The company just have to pay 2-7% of your salary to your fund each year. For tech jobs it's mostly at the top of the range.
The companies do not have to do this. It is purely optional, though there is a tax advantage I believe. Most "professionals" have the option at their company.
A bigger problem is that the 401k offerings are fairly bad usually. The people picking them are HR staffers who frequently don't have experience in finance, so the plans frequently have murderously high expense ratios. Even to the point where some companies repackage Vanguard funds that you can get on the open market for 10x less.
https://www.irs.gov/retirement-plans/401k-plans-deferrals-an...
total employee and employer contributions (including forfeitures) - the lesser of 100% of an employee’s compensation or $54,000 for 2017 ($53,000 for 2015 and 2016 not including "catch-up" elective deferrals of $6,000 in 2015 - 2017 for employees age 50 or older) (IRC section 415(c))
So the max is basically 200% match of the individual's contribution, which is maxed out at $18,000 for an individual under 50.
Many companies are doing odd things now with half percentage matching. So they will say they match all of the first 4% and then the half of the next 2%.
> In the United States, a 401(k) plan is [a] tax-qualified, defined-contribution pension account
Whether you have a pension or a 401(k) has a very big impact in how you organize your career in the U.S. If you have a pension, you're strongly incentivized to stay with one employer for a lifetime, because you lose it if you leave and your benefit usually depends upon length of service. That in turn means that you don't care how your resume looks to the outside world, you don't invest as much time in professional development, and you generally accept whatever advancement schedule is available in the organization.
If you have a 401(k), you're strongly incentivized to maximize your earning potential, because you only get out of it what you put into it (plus investment returns). That usually means switching jobs, which means you need to consider how your professional experiences will look to the outside world. It means that you need to be constantly up-to-date with how the industry is changing around you, and with how the financial markets are doing, and manage your own finances & career development. On the plus side, you take your 401(k) with you if you quit or move, and so you have greater flexibility. And you're not exposed to the risk that your employer could just die and take your pension with it. You are exposed to the risk of the stock market crashing, though.
Because life strategies are so different based on the different retirement schemes, people will assume certain things about you if you say you have a pension, and they'll assume other things if you talk about your 401(k). If you say you have a pension when it's really a 401(k), those assumptions are likely wrong, which leads to awkwardness all around. That's why they're different terms in colloquial usage.
Typically no, unless you're unvested, I think. You may get a much smaller benefit, though.
But in the legal/literature use it means any savings you keep for retirement. The defined benefit plan is basically gone from the private sector in the USA and is only existent in the public sector.
> In the United States, a 401(k) plan is [a] tax-qualified, defined-contribution pension account
In the US at least, if you say a job has a pension... it has a pension in the sense that you work X years, you get paid $y per year for life after you retire. Chicago teachers and Fire Fighters have a pension (for now). Tech employees almost never do.
No one would EVER advertise a job as having a pension if it had a 401k. It would be advertised as "401k match OR retirement benefits OR something along those lines"
A 401k is a fixed amount of money that you contribute, sometimes with your employer "matching" and it is usually invested in the stock market or in company stocks. It can run out quite easily.
Facebook didn't even have a 401(k) last time I interviewed there. This was after they went public.
The larger employers have moved from employer-managed defined-benefit pension plans to employee-managed defined-contribution pension plans, usually named for the section of tax code that describes the characteristics of the plan.
With defined-contribution plans, while you are working, your employer has the option of paying some money into your retirement account, which has various discouragements against early withdrawals. When you stop working, they stop paying. But you still control the account. With pension plans, the company sets money aside for future pension obligations, and may occasionally get audited by a regulator to ensure that the money is still there and adequate to pay out future benefits under certain assumptions that might not necessarily be true.
But the promised benefits of each pension plan are different, selected by the company (or muni-corp) that offered them. There was always a perpetuity (until death), and there might have also been benefits for surviving widow(er)s and minor children. Various health care benefits might have been attached, but probably not, as most retirees would probably go to Medicare.
The employee-managed accounts are seen as preferable to the older pension system, because some companies chose to use the employee pension fund to leverage their other investments or embezzle outright, and thus reneged upon their promises to retirees, who were forced to fall back on government-run pension insurance and Social Security.
Even now, the pension funds for municipal employees are at risk in towns that overpromised benefits to attract their employees, and are now going bankrupt because of it. What do you do if you are forced to either take a permanent haircut on your pension payments, or live somewhere that cannot afford to hire a firefighter? In short, I think it very likely that every remaining pension plan in the US is based on accounting that simply does not compute. At some point in your career, you discover that someone was lying to you and cheating you, and by then it's usually too late.
With the 401(k) plans, at least you know you're getting screwed out of your retirement as you're still working.