The New Retirementality, Fifth Edition

CHAPTER 4The New IRA: Individual Retirement Attitude

I used to get upset when a star player of our local team would take a big contract and head elsewhere to play. “No team loyalty anymore,” I thought. After I was ceremoniously dismissed from my company after three decades, I realized why they do it. There's no team loyalty on the other side of the equation either. If you assume someone else has your best interests at heart, you assume wrongly.

—A “retired” sports fan

All one has to do to get in touch with the modern economic realities of retirement is to take a look at the trend of the past two decades away from the paternalistic pension approach toward the autonomy of defined contribution (DC) plans including 401(k) or 403(b). Pensions—also known as defined benefit (DB) plans—were originally designed to provide guaranteed benefits for the rest of your life, and in some cases, for the rest of your spouse's life. The percentage of people being covered by pension plans has been shrinking since 2000: as of 2018, 77% of employees in the public sector had pension plans (compared to 81% five years ago) while only 13% in the private sector had them (compared to 21% five years ago).¹ But the migration from pensions to self-directed plans has already begun in the public sector and will be a massive trend going forward as more and more states and municipalities struggle to meet their pension liabilities.

The chief difference between a defined benefit and a defined contribution plan ...