It’s financially challenging to comfortably retire in the U.S. and many Americans work, without necessarily “wanting” to, well into their golden years.

Though not being able to save enough for a secure retirement isn’t a particularly new crisis, the struggle has become more widespread in recent decades. One of the factors fueling the problem is the mass decline of the traditional pension plan.

Americans want pension plans to make a comeback. According to a recent report from the National Institute for Retirement Security, 83% of respondents said they believe all workers should have a pension plan; 77% said the disappearance of pension plans makes it harder to “achieve the American dream.”

Is our call for the comeback of the traditional pension plan being heard? Could these plans return?

Pensions Put a Financial Strain on Companies

It’s understandable that Americans would want pensions to make a comeback, but they may want to know why they’ve become largely a thing of the past. They’re tough on the companies who provide them.

“One of the biggest reasons pensions went away in the first place was the financial risk they placed on a company,” said Stephen Kates, certified financial planner (CFP) and principal financial analyst at Launch That. “It was a huge responsibility and financial burden to carry for all current and future employees. As life expectancy rises, the pension plan gets riskier without commensurate increases in contributions, returns or both.”

Companies Have Widely Embraced 401(k)s Instead

As the pension plan went out of fashion, alternative retirement plans like the 401(k) became popular. These are “easier to implement, portable and take the risk off the employer,” Kates said.

Some Employers Could Bring Back Pensions — But Probably Not in Droves

Given the overwhelming demand for the return of pension plans, some employers may shift to provide them as a matter of employee retention, but ultimately, it’s unlikely we’ll see the return of these most-desired retirement plans en masse.

“Pensions are expensive and place the risk onto the company itself while 401(k)s and other defined contribution plans place the risks on the employee,” Kates said. “Employees today view themselves more than ever as free agents and job switching is commonplace after only a few years on average. Both of these shifts will be hard to rewind.”

401(k) Plans Are Improving

Though not as beloved as pension plans, 401(k) plans have a lot to offer future retirees — and they’ve gotten better as of late.

“Recent legislation like the SECURE Act has allowed more annuity products within 401(k) plans,” said Matt Hylland, financial planner and investment advisor at Arnold and Mote Wealth Management.

“This gives those an option to use their 401(k) savings plans to purchase lifetime income products that will ultimately act very similar to a pension,” he said. “This allows companies to have an offering for those who are risk averse and do not want to manage an investment account, while also relieving the company of any administrative or financial burden of managing a pension plan.”

If Maxed Out, a 401(k) Plan Can Be More Beneficial Than a Pension Plan

Consider that from a purely mathematical perspective, saving for retirement in a 401(k) plan can actually be a smarter move — if you are maxing out your contribution.

“Pensions look good, but often they come with lower salaries and fewer promotional opportunities,” said Jay Zigmont, Ph.D., MBA, CFP and founder and CEO of Childfree Wealth.

“For many people, they may be able to get a higher salary by changing jobs every two to three years, which is not a choice when you are on the pension path.”

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