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Why do government pensions even exist anymore? There is absolutely no reason for them and they need to go. The government can pay a reasonable salary if they w

Why do government pensions even exist anymore? There is absolutely no reason for them and they need to go. The government can pay a reasonable salary if they wanted skilled workers.

TDL 10y ago
I agree with you. I think pensions are a mistake in general, however, many municipalities, counties, and states are locked in to existing pensions schemes. I am for doing away with pensions in the future, but the existing obligations need to be funded appropriately.
- sphinx65 10y ago
  Pensions aren't the mistake, low interest rates are the mistake.
- chrisseaton 10y ago
  Doing away with pensions? Huh? How would that work? What would everyone do when they got too old to work? Do you think people should just build up a savings account? Without an annuity what would they do if they live longer than they planned and run out of savings?
  - TDL 10y ago
    There are other accounts/instruments that can replace public pensions. The reality is that politicians over promise on pensions and create unsustainable obligations for future generations.
    - chrisseaton 10y ago
      They could just use defined contribution then there's no future liability.
      - TDL 10y ago
        Agreed
      - HillaryBriss 10y ago
        Yes. But try getting that enacted into law in California. Public sector unions are strongly against that sort of arrangement. They prefer that the taxpayer guarantee them a defined level of pension benefit (no matter what the investment markets do). In other words, it seems that public sector unions want the taxpayer to insulate them from the real world shocks which the other 80% of people have to endure. It's a very valuable benefit and it's understandable that they fight for it. But it is super expensive for the cities and states. In LA there was an attempt about 5 years ago to gather signatures just to put a measure on the ballot to transition city workers from defined benefit to a 401K style defined contribution pension plan. But certain public sector unions made it known that they planned to send their people out to sign those petitions with unverifiable, fake names and addresses. This would increase the likelihood of a failed signature verification process, meaning that the petition would probably not succeed at getting the measure on the ballot. So they dropped the whole effort.
  - eweise 10y ago
    You mean what would all the government workers do when they get too old to work? I don't know but I don't get a pension so why should I pay for theirs?
    - iofj 10y ago
      Given that interest rates are 0.25% and inflation (non-core, the one you'll be paying) is >3% ... what is your alternative ? A pension is the only chance you have of a decent life when you get old. There is nothing else.
      - sbardle 10y ago
        I'm hoping Basic Income will be up and running by the time I hit my late 60s.
        iofj 10y ago
        But the "basic income" proposals are completely unrealistic. The real proposals, generally referred to as "helicopter money" are about just forgiving central-bank owned government debt, then using the free cash to embark on large infrastructure projects. You won't see any of that cash unless you're involved in the building industry.
    - chrisseaton 10y ago
      I don't understand (and I'm being down voted so I must be saying something stupid) but why do you care if government workers get a salary and a pension bought for them, or a bit more salary and buy their own pension? And don't most most jobs still include a pension as a standard benefit? I'd say you were in the minority if you're a full time tech worker and have no pension at all.
      - toast0 10y ago
        The problem with government pensions is that the work of today is paid for with money today and a promise of money in the future for an undeterminable number of years. Many governments have not saved prudently for their future obligations and the result is current taxes going to support past workers, which taxpayers don't appreciate when it gets extreme. In the private sector, pensions have been going away -- I've worked for about nine employers in the last 20 years or so, only one had a pension plan, a public school district. (I wasn't eligible to participate because I held a part time position) Many (most?) private sector employers offer participation in defined contribution retirement plans such as 401(k), some with employer contributions -- those are much simpler to manage, today's work gets paid for today. There are some government plans of this type, and taxpayers don't get upset about them, generally.
  - cylinder 10y ago
    They would save money themselves? I thought America is all about personal responsibility and independence and such? They can use 401k just like the private sector.
    - chrisseaton 10y ago
      But a private 401k is just another type of pension. The people I was replying to were saying that pensions, in general, so of all types, were a bad idea.
      - cylinder 10y ago
        Many pensions in the US promised guaranteed payments in retirement that they cannot now meet in low interest rate environments. This is one of the core issues with pensions in the US. Also, pensions are not controlled by the individual. The money is pooled and managed by the pension fund. This is of course subject to corruption and bloated fees as we have seen. The 401k program is not perfect, and in fact needs to be totally reformed, but they at least offer more choice and competition and do not promise guaranteed returns.
      - dragonwriter 10y ago
        Pensions are defined benefit, 401k is defined contribution. They are both retirement vehicles, but distinctly different, particularly in terms of risk.
sphinx65 10y ago
Because they were promises made a long, long time ago, when interest rates were high enough to support the idea of pensions and retirement?
- huherto 10y ago
  Excuse my ignorance. How are interest rates and pensions connected?
  - khuey 10y ago
    The higher investment returns are, the less money I need to set aside now to pay future obligations. The lower they are, the more I need to set aside.
  - sphinx65 10y ago
    Pensions don't make any money with interest rates as low as they are. They need to be around 8% or so for pensions to be viable. Currently pension funds are doing the same unwise speculative investments everyone else is making because nothing else pays enough. As go pensions so goes retirement in general. Pensions were perfectly viable until the reign of Greenspan.
yequalsx 10y ago
For me the question is why don't all workers have pensions? As I understand it most 401(k) plans have high expense ratios, rely on people actively participating and generally leave workers with an underfunded retirement. I prefer a system much like the French. Leaving it up to an individual to plan 40 years into the future does not seem like a sensible social policy.
- jonathankoren 10y ago
  Pensions used to be common until the 1980s. I found this report from the St Louis Fed talking about the transition. https://www.stlouisfed.org/publications/central-banker/summer-2002/a-pension-for-change https://www.stlouisfed.org/publications/central-banker/summe...
  - sjg007 10y ago
    Wall Street wanted in on the action which is why we got the 401k.
- brooklyndavs 10y ago
  Agree, especially with all of the choices that employees have and the risks & fees associated with those choices. Mostly, it seems to be another way to funnel middle class money into the financial industry. The history of the 401k is interesting and was never intended to replace a work's pension. "It was intended to allow taxpayers a break on taxes on deferred income. In 1980, a benefits consultant named Ted Benna took note of the previously obscure provision and figured out that it could be used to create a simple, tax-advantaged way to save for retirement. The client for whom he was working at the time chose not to create a 401(k) plan." https://en.wikipedia.org/wiki/401(k) https://en.wikipedia.org/wiki/401(k)
dragonwriter 10y ago
> The government can pay a reasonable salary if they wanted skilled workers. Government doesn't even pay a reasonable salary + benefits for many positions including pensions, in overall monetary value, and the public and politicians aren't generally interested in fixing that.
brooklyndavs 10y ago
Also, keep in mind, because of pensions most government workers don't get social security when they retire. My mother, a public school teacher for 20 years, only lives on her pension. Now, if we think government employees should pay into and get social security when they retired thats a debate that might be worthwhile to have. However, in the meantime the trade off has been lower salary and no social security in the public sector vs private sector but you do get a pension in the end.
toast0 10y ago
It's much harder for a government employer to remove a pension than for a private employer, so it's going to take a lot longer for the public sector to eliminate pensions than it has taken the private sector. Governments tend not to go out of business, or get acquired. Governments rarely have the finances to buy out a pension (if they did, they would fund their pension obligations). Governments have a much harder time implementing a dual class workforce where newer employees don't get a pension, because they will often see public pressure when terms of employment are unequal -- a private employer may get pressured too, it can ignore it.

Why do government pensions even exist anymore? There is absolutely no reason for them and they need to go. The government can pay a reasonable salary if they wanted skilled workers.

TDL 10y ago

I agree with you. I think pensions are a mistake in general, however, many municipalities, counties, and states are locked in to existing pensions schemes. I am for doing away with pensions in the future, but the existing obligations need to be funded appropriately.

sphinx65 10y ago
Pensions aren't the mistake, low interest rates are the mistake.
chrisseaton 10y ago
Doing away with pensions? Huh? How would that work? What would everyone do when they got too old to work? Do you think people should just build up a savings account? Without an annuity what would they do if they live longer than they planned and run out of savings?
- TDL 10y ago
  There are other accounts/instruments that can replace public pensions. The reality is that politicians over promise on pensions and create unsustainable obligations for future generations.
  - chrisseaton 10y ago
    They could just use defined contribution then there's no future liability.
    - TDL 10y ago
      Agreed
    - HillaryBriss 10y ago
      Yes. But try getting that enacted into law in California. Public sector unions are strongly against that sort of arrangement. They prefer that the taxpayer guarantee them a defined level of pension benefit (no matter what the investment markets do). In other words, it seems that public sector unions want the taxpayer to insulate them from the real world shocks which the other 80% of people have to endure. It's a very valuable benefit and it's understandable that they fight for it. But it is super expensive for the cities and states. In LA there was an attempt about 5 years ago to gather signatures just to put a measure on the ballot to transition city workers from defined benefit to a 401K style defined contribution pension plan. But certain public sector unions made it known that they planned to send their people out to sign those petitions with unverifiable, fake names and addresses. This would increase the likelihood of a failed signature verification process, meaning that the petition would probably not succeed at getting the measure on the ballot. So they dropped the whole effort.
- eweise 10y ago
  You mean what would all the government workers do when they get too old to work? I don't know but I don't get a pension so why should I pay for theirs?
  - iofj 10y ago
    Given that interest rates are 0.25% and inflation (non-core, the one you'll be paying) is >3% ... what is your alternative ? A pension is the only chance you have of a decent life when you get old. There is nothing else.
    - sbardle 10y ago
      I'm hoping Basic Income will be up and running by the time I hit my late 60s.
      - iofj 10y ago
        But the "basic income" proposals are completely unrealistic. The real proposals, generally referred to as "helicopter money" are about just forgiving central-bank owned government debt, then using the free cash to embark on large infrastructure projects. You won't see any of that cash unless you're involved in the building industry.
  - chrisseaton 10y ago
    I don't understand (and I'm being down voted so I must be saying something stupid) but why do you care if government workers get a salary and a pension bought for them, or a bit more salary and buy their own pension? And don't most most jobs still include a pension as a standard benefit? I'd say you were in the minority if you're a full time tech worker and have no pension at all.
    - toast0 10y ago
      The problem with government pensions is that the work of today is paid for with money today and a promise of money in the future for an undeterminable number of years. Many governments have not saved prudently for their future obligations and the result is current taxes going to support past workers, which taxpayers don't appreciate when it gets extreme. In the private sector, pensions have been going away -- I've worked for about nine employers in the last 20 years or so, only one had a pension plan, a public school district. (I wasn't eligible to participate because I held a part time position) Many (most?) private sector employers offer participation in defined contribution retirement plans such as 401(k), some with employer contributions -- those are much simpler to manage, today's work gets paid for today. There are some government plans of this type, and taxpayers don't get upset about them, generally.
- cylinder 10y ago
  They would save money themselves? I thought America is all about personal responsibility and independence and such? They can use 401k just like the private sector.
  - chrisseaton 10y ago
    But a private 401k is just another type of pension. The people I was replying to were saying that pensions, in general, so of all types, were a bad idea.
    - cylinder 10y ago
      Many pensions in the US promised guaranteed payments in retirement that they cannot now meet in low interest rate environments. This is one of the core issues with pensions in the US. Also, pensions are not controlled by the individual. The money is pooled and managed by the pension fund. This is of course subject to corruption and bloated fees as we have seen. The 401k program is not perfect, and in fact needs to be totally reformed, but they at least offer more choice and competition and do not promise guaranteed returns.
    - dragonwriter 10y ago
      Pensions are defined benefit, 401k is defined contribution. They are both retirement vehicles, but distinctly different, particularly in terms of risk.

sphinx65 10y ago

Because they were promises made a long, long time ago, when interest rates were high enough to support the idea of pensions and retirement?

huherto 10y ago
Excuse my ignorance. How are interest rates and pensions connected?
- khuey 10y ago
  The higher investment returns are, the less money I need to set aside now to pay future obligations. The lower they are, the more I need to set aside.
- sphinx65 10y ago
  Pensions don't make any money with interest rates as low as they are. They need to be around 8% or so for pensions to be viable. Currently pension funds are doing the same unwise speculative investments everyone else is making because nothing else pays enough. As go pensions so goes retirement in general. Pensions were perfectly viable until the reign of Greenspan.

yequalsx 10y ago

For me the question is why don't all workers have pensions? As I understand it most 401(k) plans have high expense ratios, rely on people actively participating and generally leave workers with an underfunded retirement. I prefer a system much like the French. Leaving it up to an individual to plan 40 years into the future does not seem like a sensible social policy.

jonathankoren 10y ago
Pensions used to be common until the 1980s. I found this report from the St Louis Fed talking about the transition. https://www.stlouisfed.org/publications/central-banker/summer-2002/a-pension-for-change https://www.stlouisfed.org/publications/central-banker/summe...
- sjg007 10y ago
  Wall Street wanted in on the action which is why we got the 401k.
brooklyndavs 10y ago
Agree, especially with all of the choices that employees have and the risks & fees associated with those choices. Mostly, it seems to be another way to funnel middle class money into the financial industry. The history of the 401k is interesting and was never intended to replace a work's pension. "It was intended to allow taxpayers a break on taxes on deferred income. In 1980, a benefits consultant named Ted Benna took note of the previously obscure provision and figured out that it could be used to create a simple, tax-advantaged way to save for retirement. The client for whom he was working at the time chose not to create a 401(k) plan." https://en.wikipedia.org/wiki/401(k) https://en.wikipedia.org/wiki/401(k)

dragonwriter 10y ago

> The government can pay a reasonable salary if they wanted skilled workers. Government doesn't even pay a reasonable salary + benefits for many positions including pensions, in overall monetary value, and the public and politicians aren't generally interested in fixing that.

brooklyndavs 10y ago

Also, keep in mind, because of pensions most government workers don't get social security when they retire. My mother, a public school teacher for 20 years, only lives on her pension. Now, if we think government employees should pay into and get social security when they retired thats a debate that might be worthwhile to have. However, in the meantime the trade off has been lower salary and no social security in the public sector vs private sector but you do get a pension in the end.

toast0 10y ago

It's much harder for a government employer to remove a pension than for a private employer, so it's going to take a lot longer for the public sector to eliminate pensions than it has taken the private sector. Governments tend not to go out of business, or get acquired. Governments rarely have the finances to buy out a pension (if they did, they would fund their pension obligations). Governments have a much harder time implementing a dual class workforce where newer employees don't get a pension, because they will often see public pressure when terms of employment are unequal -- a private employer may get pressured too, it can ignore it.