Intangible Wealth comments on retirement plans:
By now, it’s pretty clear that defined-benefit pension plans are an endangered species (see this article). Even relatively healthy firms are switching to defined-contribution plans to transfer investment risk to workers.
Is this a good thing? Sure, if the average Joe was equipped to make smart financial decisions. However, there’s a lot of research that suggest the average investor makes plenty of costly mistakes, such as overlooking costs (this piece provides a nice summary). In that regard, traditional company pension funds, which are usually large and managed professionally, may provide better performance.
Intangible Wealth focuses on transferring risk, investment returns, and average Joe's ability to grow their retirement fund. But another issue favors defined-contribution plans: defined-benefit plans that are underfunded rob the workers of their retirement funds. Add bankruptcy to the underfunding issue and you can have millions of workers without retirement funds, depending on the government to make up the difference. Defined-contribution plans allow the worker to control their retirement funds instead of a large institution. Should workers have the freedom and responsibilty of managing their own retirement savings?