Last week, I talked about the pros and cons of how the â€œGreatest Generationâ€ employees would spend their entire careers with the same company, because at retirement they would get a lifetime pension.
Last week, I talked about the pros and cons of how the “Greatest Generation” employees would spend their entire careers with the same company, because at retirement they would get a lifetime pension.
In 1978, the Baby Boomers changed everything with the 401k. There are pros and cons to almost everything, and here are the pros for the employees:
Employees won the freedom to change jobs whenever they want, and they could take their 401(k) with them. Employees also had the ability to take advantage of stock market gains.
The cons for the employees: There are limits to how much can be contributed to a 401(k). Along with stock market gains, comes stock market losses. On average, the stock market crashes every five years. Moreover, there are no lifetime incomes or guarantees. The end result is that ninety-seven percent of Americans will run out of money in retirement if they live long enough. Simply put, they have no financial security.
The pros for the companies: The cost to offer a 401(k) to employees is far less than the cost of funding the old pension plans.
The cons for the companies: Employee turnover rates and costs skyrocketed, because there is nothing tying the employees to the company. According to recent numbers from the Bureau of Labor Statistics, the average US worker changes jobs every 4.4 years. The cost of replacing an executive is a little more than double his or her salary. If you talk to an employer about employee retention you instantly have their attention.
Healthcare is one sixth of our economy, and the physician shortage makes the problem of retention absolutely enormous. If you go to a rural area, the problem is nothing short of overwhelming.
The big question is where do we go from here? I’ll cover that next week right here on the Alemian file.
If you have questions or comments send an email to David@theAlemianfile.com, or visit my website at www.CapitalCrestFinancialGroup.com. Absolutely make sure you come back here next week for another edition of the Alemian file.