Pensions and 401(k)s solve the same problem — funding retirement — through fundamentally opposite structures, and the difference comes down to who's taking on the financial risk. * A pension is a defined benefit plan: it promises you a specific, predictable payout in retirement, typically a monthly check calculated from your years of service and salary history. Your employer funds and manages the investments behind that promise, and critically, your employer bears the risk — if the pension fund's investments underperform, the employer still owes you the promised amount, not a reduced one. * A 401(k) is a defined contribution plan: instead of a promised payout, you and possibly your employer contribute money into an individual account that you direct the investment of, usually among a menu of mutual funds. There's no guaranteed final number — what you end up with depends entirely on how much went in and how the market performed over your working years. You bear the investment risk, not your employer. * This distinction has a real practical consequence: a 401(k) account balance can be depleted if you draw it down too fast or the market performs poorly right when you need the money, something that structurally can't happen with a properly funded pension. * Traditional pensions have become rare in the private sector. As of recent Congressional Research Service data, only about 15% of workers with access to any employer retirement plan have access to a defined benefit pension — the large majority of employers have shifted entirely to 401(k)-style defined contribution plans instead.