Most everyone has heard the saying, “If it’s going to be, it’s up to me.” I think that is an accurate saying. Gone are the days that company pensions were provided for employees. Most of you have likely heard of a pension, but how many of you really know what it is?

A pension is a company-sponsored, defined-benefit plan. During employment, workers pay into a pension fund managed by their employer. When they retire, the company uses that fund to give the employee income in retirement.

Sounds simple, right? It was. Employees didn’t have to worry about planning for retirement because they could rely on their employer to take care of them.

By 1975, the Employee Benefit Research Institute reported that 103,356 plans covered 40 million people. A lot of people used to rely on pension plans — but all that has changed. USA Today reports that according to the U.S. Bureau of Labor and Statistics, from 1980 to 2015, the percentage of “private wage and salary workers” participating in defined benefit pension plans, decreased from 38 percent to 15 percent.

So what happened?

Americans used to rely primarily on pensions to support their retirement — until one day, they didn’t.

The switch didn’t happen that quickly, but it did happen pretty darn fast.

Let me back up.

People used to rely on pensions, but as people started living longer, and Baby Boomers, the country’s biggest generation to date, began entering the workforce,

the cost of pensions increased. (There were also increased compliance costs because of ERISA, the Employee Retirement Income Security Act of 1974, signed by President Gerald Ford, but we don’t need to go into those details.) Companies began struggling to support these plans and were looking for other options. That’s when the 401(k) came into play.

When Congress amended the Internal Revenue Code by enacting the Revenue Act of 1978, the shift from pensions to 401(k)s officially began, but it wasn’t until 1981 that businesses started incorporating them into their benefit practices.

By 1983, there were 7 million 401(k) participants, and the savings vehicle has only grown in popularity from there. Like I mentioned earlier, as of 2014, there was more than $4.4 trillion assets sitting in 401(k)s, erasing any doubt that the 401(k) is America’s primary retirement savings tool.

But it was never intended to replace the pension; it was meant to supplement it.

The first pension was created in 1875 by the American Express Company. In 1900, the average life expectancy for a man was 46.3. In 1930, that number jumped up to 58.1. By 1975, the age increased to 68.8. In 1935, the original Social Security Act was created, setting the age for retirement benefits at 65. Today, the benefit age is 66 and 2 months for anyone born in 1955 and increases gradually to 67 for anyone born after 1960.

We were living longer, but working the same length of time, meaning our employers were taking a bigger and bigger brunt of the pension costs with each passing year. And when the Baby Boomers began entering the workforce, the country’s largest generation to date, those costs naturally became unbearable.

How could we possibly have expected the pension to last? We didn’t, which is why the 401(k) became so popular. Suddenly, companies could offer a retirement plan, receive the tax benefits by offering a tax-deferred match, and save money. It was a dream come true.

Pension plans were replaced by 401(k)s because they were more affordable. It’s as simple as that.

But like I said before, it wasn’t meant to replace the pension, only supplement it. Pensions were funded to last until the employee turned 75; if you lived longer, 401(k)s were designed to cover the difference.

The 401(k) was never meant to replace the pension, but that’s exactly what it did.

You may be thinking, “That’s interesting, but what has that got to do with ‘winging it?” So many people that I meet are putting money into their 401(k)s because that’s what they’ve always done or because that’s what they were told to do. But 401(k) plans weren’t designed to be the sole funding for retirement any more than Social Security was. It was meant to supplement retirement funds. Years ago, many people believed that pensions were going to take care of them in retirement and many people believed Social Security would.

All I am saying is that you may want to have a solid plan so that you aren’t “winging” something as important as your financial future.

Holly Peterson is the owner of Elite Retirement Strategies and former radio show host. She is a professionally licensed insurance producer specializing in retirement planning and safe money solutions. Holly serves all of Idaho. You can find her online at or by calling 208-252-4345.