Defined benefit pensions themselves are set to implode once population growth stops - they are a Ponzi scheme that will break down within a hundred years resulting in at least a reduction in benefits.
Under-funded defined benefit pensions may be a Ponzi scheme. But properly funded (X% of salary per month, calculated to cover future costs) defined benefit pensions are significantly cheaper for a given level of benefits, because they only pay out only until the beneficiaries die. Employee owned accounts (IRAs, 503Bs) are passed on to the next generation. Good for the kids, but not for the parents or the company.
> Don't see how it can "implode" -- the pensions would just get smaller.
Two problems with this:
First, it will get small enough that you won't have a retirement and will work till you die.
Second, reducing pensions tends to be quite unpopular, and when chasing profits for the current quarter, CFO's don't care about the unsustainability of pensions decades down the road. By the time they have to deal with it, it's too late.
Oregon still has a defined benefits pension for its workers, and the problem is here and now. Small towns cannot afford to hire more firefighters, police, etc as their population grows because more and more of the money they have is going into paying out the defined pensions. They keep getting around this problem by taking out more loans to sustain those pensions. Despite the problem being now, they cannot politically reduce benefits for new hires.
Defined benefit and defined contribution plans both have access to the same government bonds and private markets. If a 401k can fund a retirement, so can a pension fund. Likewise, if broad changes to the economy cause a reduction in pension benefits, those changes will also result in reduced benefits for 401k owners.
