Why Some Teachers Prefer a 401(k) Over a Pension

n 2012, the Michigan Legislature passed a bill that kept open the teacher pension system but began allowing school employees to choose a 401(k)-type defined contribution retirement account.
Since then, around 18,000 school employees have chosen the 401(k) instead of the old pension system, according to a FOIA request. Their reasons for making the switch range from concerns about future pension cuts and underfunding to wanting more control over retirement funds.

“I chose the defined contribution option for a number of reasons. One of which … [is] the pension program is underfunded and may or may not be existent when it comes my time to collect,” said Adam Hastings, a math teacher at Athens High School. “ I also was told that the 401(k)-type option was more portable under the circumstance that I should decide to move to another state.”

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See also part II...

Fears About State Pension Underfunding Drive School Employees to Other Options

Going Dutch: How to run a functional pension system

Imagine a place where pensions were not an ever-deepening quagmire, where the numbers told the whole story and where workers could count on a decent retirement.

Imagine a place where regulators existed to make sure everyone followed the rules.

That place might just be the Netherlands. And it could provide an example for America’s troubled cities, or for states like Illinois and New Jersey that have promised more in pension benefits than they can deliver.

“The rest of the world sort of laughs at the United States — how can a great country like the United States get so many things wrong?” said Keith Ambachtsheer, a Dutch pension specialist who works at the University of Toronto — specifically at its Rotman International Center for Pension Management, a global clearinghouse of information on how successful retirement systems work.

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