Pension vs 401k: how to choose when starting a new job?
Choosing between a pension and a defined-contribution plan depends heavily on how long you plan to stay at the company and whether you prefer guaranteed lifetime income over market-driven returns. Because pensions typically require meeting a multi-year vesting period before you are entitled to the benefit, job tenure becomes a major gamble if you are unsure whether you will stick around for the long haul.
What people tried
Every workaround mentioned in the threads below. We haven’t tested any of them — and nobody here is claiming they worked.
- 1Reviewing the Prime Directive in the personal finance Wiki
- 2Trying to figure out where to allocate paychecks independently
- 3Evaluating expected job tenure to see if vesting periods and lifetime benefits outweigh immediate portability.
- 4Comparing employer match percentages and contribution requirements between the two plans.
In their words
Unedited, grouped by where they were said, most upvoted first within each place, each linked to the thread it came from.
“Should I go for the retirement pension plan or a 403(b) plan?”source ↗
“They also gave new hires a year to decide if we want a 10% pension or 10% 401k (no employee match, just need to be vested for 4 years).”source ↗
“Any input to enlighten me?”source ↗
“That's part of the dilemma, short answer is I don't know but ideally, if I like the job, I'd stay as long as I could.”source ↗
Where this came up
People with this problem also raised
- 9Should I do a Roth conversion or stick to traditional 401k?
- 5Keep defined benefit pension or roll over to an IRA?
- 15What funds and allocations should I pick for a new Roth IRA?
- 5Should I invest extra savings in a brokerage account or a Roth IRA?
- 10Is giving up a secure pension job worth it?
- 13Should I max my IRA or 401k first after a raise?