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It's disgusting to me that something like this could even be published in the NYT. Pensions are absurd financial instruments. Paying someone a percentage of the

by darawk 9y ago

It's disgusting to me that something like this could even be published in the NYT. Pensions are absurd financial instruments. Paying someone a percentage of their salary in perpetuity is financial nonsense, and creates all kinds of perverse incentives for the recipients. The only reason these things ever got popular in the first place is because they were a way of borrowing from the future to pay the present. Creating a massive latent risk that allows you to get cheap labor in the short term and exposes you to catastrophic failure on the backend. Corporations realized this decades ago and stopped using them. If the problem is that 401k fees are too high, let's make 401k's more mobile. Let's create a liquid market in 401k managers so that fees get pushed towards zero - as they should be.

deleted 9y ago
[deleted]
poster123 9y ago
"Pensions are absurd financial instruments." I don't agree. Retirees do need money as long as they live, which is what pensions (including Social Security) provide. Pensions needed to be properly funded, as the income annuities offered by insurance companies are.
- acchow 9y ago
  > as the income annuities offered by insurance companies are To which kind of insurance are you referring?
  - poster123 9y ago
    Life insurance companies commonly sell various kinds of annuities as well, since they are experienced with pricing life expectancy. Google "immediate annuity" or "income annuity" to get quotes.
  - colinsidoti 9y ago
    Deferred income annuities. They're insurance against your risk of longevity. Here's an example from New York Life: https://www.nylinvestments.com/annuities/products/New-York-Life-Guaranteed-Future-Income-Annuity-II https://www.nylinvestments.com/annuities/products/New-York-L...
tomc1985 9y ago
Why? Pensions exist to serve retirees, not those retirees' former corporate masters. One of the only truly kind things an organization can do for an individual that serves them over a lifetime, and you would shit on it? 401(k) is a poor solution that requires individual initiative to deploy successfully. Those who don't contribute eventually burden those who do (even if that burden can potentially be paid for in advance, if you have the account type that taxes on deposit), and that's only if they withstood the lifetime of temptations that press people into early withdrawal.
- Kalium 9y ago
  You're absolutely right! Pensions exist to serve retirees, not their former overlords. Looking after the needs of the retired is the kind, decent, humane thing to do. It's not about whose interests they serve so much as it is how sustainable and practical they actually are. Is it kind to make a commitment to someone around which they will organize their life at the cost of crippling the lives of their successors? What if that organization isn't a company, but a government, and the resulting costs cripple its ability to perform other functions? Is it kind to cripple a city's services or a school's ability to teach in order to meet pension obligations that were poorly planned for decades? Who will pay a company's pension bill if the pensions push it into insolvency? These aren't trivial questions with easy, pre-baked answers. They also are real, pressing questions that face us today. Your heart is unquestionably in the right place - it's not about the investor class! It's about the retirees who have given their lives! But there might be some room for subtlety.
  - tomc1985 9y ago
    You conflate mismanagement with the act itself... I agree with you that increased lifespans throw a wrench in the works, but that is not enough of a problem to justify throwing out the baby with the bathwater. Pensions represent a HUGE portion of market actors' institutional conservatism and that is a necessary counterweight to the sort of irrational exuberance that is endemic to tech and other forward-thinking sectors You want to talk about skyrocketing costs? Why not focus that energy on sorting out the mountains of institutional waste found elsewhere in the economy? Like, why the fuck does infrastructure here cost 10x other industrialized countries? Lots more money to be freed up that way
mfoy_ 9y ago
It's an Op-ed opinion piece... Although, I agree pensions are... sub-optimal.
ceejayoz 9y ago
Do you have similar concerns with annuities?
alecco 9y ago
It's a ponzi-like system. When the population pyramid inverts it becomes insolvent. This is happening everywhere. Then the taxpayers have to foot the bill.
pm90 9y ago
That is a valid point. Pensions probably made a lot more sense when life expectancy was lower. Today? Not so much. Probably the reason why so many pensions went bankrupt. 401(k)'s do seem like a much better option. However not all employers provide that. I'm not sure what the solution is.
- Amezarak 9y ago
  Life expectancy at 65 has barely budged in the past 100 years (we gained about four years.) On top of that, for the past two years (2015 and 2016), it's decreased.
omegaworks 9y ago
> It's disgusting to me that something like this could even be published in the NYT. Just because the take is left-of-center and questions neoliberal doctrine, it shouldn't be publishable? We were sold that privatization would lead to more efficiently run societal safety nets, that it would provide a net-benefit to the worker and to society. The article argues that not only did transition to 401k enrich money management middlemen, it's done worse: it's disenfranchised us. It's destroyed our ability to collectively act via our retirement funds.
WaylonKenning 9y ago
In New Zealand, we have Government Super, which is set to 65% of the net average wage (1). Of course, this is expensive, which is why we have the Government putting aside money into a sovereign wealth fund to help pay for it (2). We also know that we should personally contribute if we want a better retirement, so we have personal retirement accounts, where the minimum contribution is 3% of salary, matched with 3% from your employer, plus ~$500 NZD from the Government (3). (1) - https://en.wikipedia.org/wiki/Welfare_in_New_Zealand#Superannuation https://en.wikipedia.org/wiki/Welfare_in_New_Zealand#Superan... (2) - https://en.wikipedia.org/wiki/New_Zealand_Superannuation_Fund https://en.wikipedia.org/wiki/New_Zealand_Superannuation_Fun... (3) - https://en.wikipedia.org/wiki/KiwiSaver https://en.wikipedia.org/wiki/KiwiSaver
thatswrong0 9y ago
NYTimes has been such a liberal rag lately

by darawk 9y ago

deleted 9y ago

[deleted]

poster123 9y ago

"Pensions are absurd financial instruments." I don't agree. Retirees do need money as long as they live, which is what pensions (including Social Security) provide. Pensions needed to be properly funded, as the income annuities offered by insurance companies are.

acchow 9y ago
> as the income annuities offered by insurance companies are To which kind of insurance are you referring?
- poster123 9y ago
  Life insurance companies commonly sell various kinds of annuities as well, since they are experienced with pricing life expectancy. Google "immediate annuity" or "income annuity" to get quotes.
- colinsidoti 9y ago
  Deferred income annuities. They're insurance against your risk of longevity. Here's an example from New York Life: https://www.nylinvestments.com/annuities/products/New-York-Life-Guaranteed-Future-Income-Annuity-II https://www.nylinvestments.com/annuities/products/New-York-L...

tomc1985 9y ago

Why? Pensions exist to serve retirees, not those retirees' former corporate masters. One of the only truly kind things an organization can do for an individual that serves them over a lifetime, and you would shit on it? 401(k) is a poor solution that requires individual initiative to deploy successfully. Those who don't contribute eventually burden those who do (even if that burden can potentially be paid for in advance, if you have the account type that taxes on deposit), and that's only if they withstood the lifetime of temptations that press people into early withdrawal.

Kalium 9y ago
You're absolutely right! Pensions exist to serve retirees, not their former overlords. Looking after the needs of the retired is the kind, decent, humane thing to do. It's not about whose interests they serve so much as it is how sustainable and practical they actually are. Is it kind to make a commitment to someone around which they will organize their life at the cost of crippling the lives of their successors? What if that organization isn't a company, but a government, and the resulting costs cripple its ability to perform other functions? Is it kind to cripple a city's services or a school's ability to teach in order to meet pension obligations that were poorly planned for decades? Who will pay a company's pension bill if the pensions push it into insolvency? These aren't trivial questions with easy, pre-baked answers. They also are real, pressing questions that face us today. Your heart is unquestionably in the right place - it's not about the investor class! It's about the retirees who have given their lives! But there might be some room for subtlety.
- tomc1985 9y ago
  You conflate mismanagement with the act itself... I agree with you that increased lifespans throw a wrench in the works, but that is not enough of a problem to justify throwing out the baby with the bathwater. Pensions represent a HUGE portion of market actors' institutional conservatism and that is a necessary counterweight to the sort of irrational exuberance that is endemic to tech and other forward-thinking sectors You want to talk about skyrocketing costs? Why not focus that energy on sorting out the mountains of institutional waste found elsewhere in the economy? Like, why the fuck does infrastructure here cost 10x other industrialized countries? Lots more money to be freed up that way

mfoy_ 9y ago

It's an Op-ed opinion piece... Although, I agree pensions are... sub-optimal.

ceejayoz 9y ago

Do you have similar concerns with annuities?

alecco 9y ago

It's a ponzi-like system. When the population pyramid inverts it becomes insolvent. This is happening everywhere. Then the taxpayers have to foot the bill.

pm90 9y ago

That is a valid point. Pensions probably made a lot more sense when life expectancy was lower. Today? Not so much. Probably the reason why so many pensions went bankrupt. 401(k)'s do seem like a much better option. However not all employers provide that. I'm not sure what the solution is.

Amezarak 9y ago
Life expectancy at 65 has barely budged in the past 100 years (we gained about four years.) On top of that, for the past two years (2015 and 2016), it's decreased.

omegaworks 9y ago

> It's disgusting to me that something like this could even be published in the NYT. Just because the take is left-of-center and questions neoliberal doctrine, it shouldn't be publishable? We were sold that privatization would lead to more efficiently run societal safety nets, that it would provide a net-benefit to the worker and to society. The article argues that not only did transition to 401k enrich money management middlemen, it's done worse: it's disenfranchised us. It's destroyed our ability to collectively act via our retirement funds.

WaylonKenning 9y ago

In New Zealand, we have Government Super, which is set to 65% of the net average wage (1). Of course, this is expensive, which is why we have the Government putting aside money into a sovereign wealth fund to help pay for it (2). We also know that we should personally contribute if we want a better retirement, so we have personal retirement accounts, where the minimum contribution is 3% of salary, matched with 3% from your employer, plus ~$500 NZD from the Government (3). (1) - https://en.wikipedia.org/wiki/Welfare_in_New_Zealand#Superannuation https://en.wikipedia.org/wiki/Welfare_in_New_Zealand#Superan... (2) - https://en.wikipedia.org/wiki/New_Zealand_Superannuation_Fund https://en.wikipedia.org/wiki/New_Zealand_Superannuation_Fun... (3) - https://en.wikipedia.org/wiki/KiwiSaver https://en.wikipedia.org/wiki/KiwiSaver

thatswrong0 9y ago

NYTimes has been such a liberal rag lately