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I'm not trying to be antagonistic. All pyramid schemes start out solvent. That's how they convince more people to join. There is a simple test to see if any o
by snarf21 10y ago
I'm not trying to be antagonistic.
All pyramid schemes start out solvent. That's how they convince more people to join.
There is a simple test to see if any of these things are pyramid schemes. If no new money comes in and no new people participate, can all the payouts that have been promised be made? I think it is clear that pension plans don't pass this test.
- ec109685 10y agoYes, a properly funded pension doesn't need new money to pay out existing benefits. The new money coming is a down payment for the people who will eventually retire, not to pay out benefits for those who have retired. Also, Ponzi scheme is a closer match to what you are implying. Pyramid involves escalating returns based on recruiting new members "under you".
- snarf21 10y agoIf each persons money was able fund their own retirement then fixed contribution plans can only be better as there is no longer any pension fund to pay for. Also, I am implying that most pension plans are ponzi schemes. They depend on future people to make up for the short falls. A properly funded one would basically be just a managed fixed contribution plan. I don't know of any that are like that. I'd be curious to read about any that are.