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Sure, but my comment was supposing a hypothetical. Say you're a new state, Zion, and you have the two options available to you: 1) Simply let your employees in

by tabeth 9y ago

Sure, but my comment was supposing a hypothetical. Say you're a new state, Zion, and you have the two options available to you: 1) Simply let your employees invest in their own retirement via a 401k. 2) Pool everyone's money together and invest into a super 401k. What I'm asking is if (2) is better than (1), or not. Surely someone has tried a variant of (2) before. I agree though, that funded pensions are awesome. Since some organizations clearly have trouble with that, I was just wondering if there was a simpler way to ensure liquidity in the fund. I'm aware that money is already pulled together with a pension, however my understanding is that pension funds are generally "managed" where most people who use a 401k put it in some sort of index fund where it's pretty passive as it tracks the market in general.

Godel_unicode 9y ago
2) is how most 401k's work already. e.g. Fidelity has target date funds, and everyone in the 2050 target date funds has their money in one pool which Fidelity manages as a group. There are 401k's that allow investing in individual securities (or so I'm given to understand) but that's not the norm.
lotsofpulp 9y ago
(2) is what is happening now. It just so happens that everyone does it individually in their IRA or 401(k) and then buys mutual funds with it, hence their money is now pooled. Difference is you didn't have to risk a politician or union boss in the middle meddling with the funds, nor are future taxpayers on the hook for when there is a shortfall in the fund (incentivizing diversification by 401k owners).
Spooky23 9y ago
Better despends on your perspective. There’s financial and social problems associated with the 401k model, namely that people won’t or can’t save enough or invest well. You’ll see the impact in a few years as the numbers of impoverished former middle class seniors increase. With the pension model, you fund, manage it responsibly and you have a sustainable system that benefits all. I live in a state with a constitutional guarantee of public pensions. I take a 35% pay hit, plus 10% to my own savings today for the ability to retire at 55. All big companies were able to afford this model, but the changes to tax law incentived then to ditch pensions.

by tabeth 9y ago

Godel_unicode 9y ago

2) is how most 401k's work already. e.g. Fidelity has target date funds, and everyone in the 2050 target date funds has their money in one pool which Fidelity manages as a group. There are 401k's that allow investing in individual securities (or so I'm given to understand) but that's not the norm.

lotsofpulp 9y ago

(2) is what is happening now. It just so happens that everyone does it individually in their IRA or 401(k) and then buys mutual funds with it, hence their money is now pooled. Difference is you didn't have to risk a politician or union boss in the middle meddling with the funds, nor are future taxpayers on the hook for when there is a shortfall in the fund (incentivizing diversification by 401k owners).

Spooky23 9y ago

Better despends on your perspective. There’s financial and social problems associated with the 401k model, namely that people won’t or can’t save enough or invest well. You’ll see the impact in a few years as the numbers of impoverished former middle class seniors increase. With the pension model, you fund, manage it responsibly and you have a sustainable system that benefits all. I live in a state with a constitutional guarantee of public pensions. I take a 35% pay hit, plus 10% to my own savings today for the ability to retire at 55. All big companies were able to afford this model, but the changes to tax law incentived then to ditch pensions.