My coworker and I are in our late 30s — they have more in their 401(k) than I do in my pension

We will always recommend that employees talk about how much they earn, without reservation. You are protected by law and companies cannot punish you for talking about how much you are paid. However, that discussion can come with some difficult realizations that others are being paid more, or their retirement looks better than your own. What do you do in these situations? What can you do if you feel like you’ve messed up your finances forever?

24/7 Wall St. Key Points:

• Pensions and 401(k) plans are not directly comparable, and they might seem unfair at first glance.
• Pensions are company-paid and guaranteed, while 401(k) plans are employee-paid and not guaranteed.
• Also: Take this quiz to see if you’re on track to retire (Sponsored)

One person, in particular, learned that a coworker of theirs has much more money in their retirement account after comparing finances. They began to feel like they had missed a great opportunity and took their concerns to the people on r/personalfinance. Here is what they said.

Please remember, however, that the advice you find online, and even in this article, are opinions. You should always talk to an expert before making any decision about your finances.

The Question

The breakdown.

The author of the post says he and his coworker are 39 years old and that their employer switched from a 401(k) plan to a pension plan about seven years ago. They had the choice to pick between the two, and the coworker opted to stay with the 401(k) while the author went with the pension.

Now they compared their plans and the coworker has $550,000 in their 401(k) while the author only has $268,000 in their pension with 18 years of service credits.

They wanted to know if they should be concerned about the difference in amounts, is it normal, or is it not really comparable?

The Community Response

Planning for retirement.

The vast majority of commenters agreed that you can’t accurately compare 401(k) plans to pension plans, and with a lack of many details, it would be impossible to compare the two plans the author has looked at accurately.

A pension is a “defined benefit” plan, which means your retirement will have a set amount based on your time at the company and your earnings before you retire. The company is responsible for investing the funds necessary to cover these retirement obligations. There is often less reward, but also much less risk with a pension.

A 401(k) is a “defined contribution” plan, which means that the company contributes money into the account based on the employee’s personal contribution. The employee is responsible for picking the plan and choosing how much to contribute. There are no guaranteed rates of returns or even any guaranteed returns at all, but they generally outperform defined benefit plans.

So, while the coworker might have more money in their 401(k), most of that money came from their own pocket, while a pension isn’t paid into by the employee and is a guaranteed amount at retirement. Beyond that, it is impossible to compare the two without a lot more detail.

If you find yourself discouraged when comparing finances with others, it pays to always take a little time and look at the details. Things aren’t usually as bad as they seem.