The shift from pensions to personal wealth

Here’s James Glassman on American Enterprise with “Good riddance to traditional pensions”:

IBM announced last week that it would freeze the old-style pension plans it provides to more than 100,000 employees and instead offer an improved version of its 401(k) plan. This is no run-of-the-mill accounting change or cut-costing measure. It is a major philosophical and economic shift for a bellwether corporation.

It means, in short, that International Business Machines is moving away from paternalism and giving workers more control over their own retirements. The U.S. government should do the same in reforming Social Security.

IBM is freezing pensions for new employees and shifting from a defined benefit plan to a defined contribution plan in a 401(k). In exchange for the shift, IBM will match dollar-for-dollar up to 6% of an employee’s pay. Anybody saving 12% of their salary every year in a tax-deferred 401(k) account is going to get very rich by retirement as long as they’re not dumb enough to refuse free money.