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Not your father's pension plan: the rise of 401K and other defined contribution plans

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  • Leora Freidberg
  • Michael T. Owyang

Abstract

The number of workers with a 401(k) plan grew from 7.1 million in 1983 to 38.9 million by 1993. The rapid diffusion of 401(k) and other portable defined contribution plans and the decline in defined benefit pensions represent a major change in pension structure. Old-style defined benefit pensions were designed to give a fixed income after retirement, but only for workers who stayed in a job for 20 or 30 years; workers who left early ended up with little or nothing. Resulting changes in portability, access to pension wealth, and riskiness are altering incentives for job tenure and worker mobility, retirement, and saving both before and after retirement.

Suggested Citation

  • Leora Freidberg & Michael T. Owyang, 2002. "Not your father's pension plan: the rise of 401K and other defined contribution plans," Review, Federal Reserve Bank of St. Louis, vol. 84(Jan.), pages 23-34.
    • Handle: RePEc:fip:fedlrv:y:2002:i:jan.:p:23-34:n:v.84no.1
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    References listed on IDEAS

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    Cited by:

    1. Leora Friedberg & Anthony Webb, 2005. "Retirement and the Evolution of Pension Structure," Journal of Human Resources, University of Wisconsin Press, vol. 40(2).
    2. Leora Friedberg & Michael T. Owyang, 2004. "Explaining the evolution of pension structure and job tenure," Working Papers 2002-022, Federal Reserve Bank of St. Louis.
    3. Antonio Torrero Mañas, 2005. "The increasing relevance of the stock market in the world: A new scenario," Working Papers 01/05, Instituto Universitario de Análisis Económico y Social.

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