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I blame Corporations getting rid of Retirement Plans for the sake of profit. My father's side grandfather had 2 retirement plans, 1) Navy Seals (12 years) 2) N

I blame Corporations getting rid of Retirement Plans for the sake of profit. My father's side grandfather had 2 retirement plans, 1) Navy Seals (12 years) 2) NYC Handy man (25 years) My mom's side grandfather 1) Custodian in NYC 20 years + 2) Jazz Musician Union 10+ years. They both were able to live a decent life after retirement and didn't work a single day afterwards. This will not happen for me. I also have a privatized plan for 15 years but my son had cancer for 5 years (Drained my retirement early) and we had 5 kids and chose to have my wife stay at home for about 7 years. Not very easy to save, heck I have no debit outside of mortgage and some student loans still. Zero credit card debit and no car payment. I know I am ahead of the curve but what about everyone else up to their necks in debit? The system is broken and most people don't save enough and a few can't. https://www.bloomberg.com/view/articles/2017-01-03/the-401-k-problem-we-refuse-to-solve https://www.bloomberg.com/view/articles/2017-01-03/the-401-k...

notyourday 9y ago
It is about choices. Having 5 kids was a choice.
pc86 9y ago
Corporations have not gotten rid of retirement plans, they've gotten rid of unsustainable defined benefit retirement plans (pensions) in exchange for defined contribution retirement plans (401ks).
- cortesoft 9y ago
  While I agree with you, I think it is important to note that defined benefit plans aren't INHERENTLY unsustainable. If you do the math right and are realistic, you can off them. You just can't underfund them or assume unrealistic stock market gains.
  - lotsofpulp 9y ago
    They're unsustainable because they require the ability to predict what will happen in the world 10,20,30+ years into the future, a feat that no one is capable of, hence the decline of defined benefit pensions. Except for those that can lean on taxpayers to make up for the miscalculations and erroneous assumptions.
    - cortesoft 9y ago
      If it was true that we can't predict the future well enough to provide a fixed income, then annuities wouldn't be a thing. We are certainly capable of predicting the future well enough to do it, the problem is that current management often has an incentive to be too optimistic about future returns when deciding how much to fund a pension. Annuity companies don't have those rose colored glasses, so they do a better job.
      - sandworm101 9y ago
        >> then annuities wouldn't be a thing. Annuities are not pensions. They pay fixed amounts based on some interest rate. The difference is in the lifetime of the beneficiary. We all die eventually, normally befor hitting 100. Short of magic, that isn't going to change much. The difference with a defined benefit retirement plan is that the cost of benefits can rise drastically. Look at the difference in the cost of health care today and in 1960.
        rileymat2 9y ago
        There are also inflation adjusted annuities. If you think this through, I don’t think you will see a dramatic difference.
    - Frondo 9y ago
      If no one can predict what will happen 10, 20, 30+ years in to the future, why is it okay when we're subjecting individuals' retirements to that same inability to predict the future?
      - lotsofpulp 9y ago
        Theoretically, so they have skin in the game and that would prevent the endemic fraud in taxpayer funded pensions like we have. Realistically, you should be cultivating social capital by way of raising a family or networking with useful people if you really want a secure future.
  - Jach 9y ago
    What does the math look like to you? I mean, back when I was a teenager I realized that this century is different, I shouldn't expect to do what my dad did and end up (albeit through a series of acquisitions / mergers) at the same company for 30-something years with a payout plan at the end. Sometime in 2012 I saw this article[0] which starts off: "The average lifespan of a company listed in the S&P 500 index of leading US companies has decreased by more than 50 years in the last century, from 67 years in the 1920s to just 15 years today" I doubt things look any rosier 6 years later. So what does the math look like when the firm lifespan of the most profitable companies is quite a bit less than the lifespan of someone's useful working period? [0] https://www.bbc.com/news/business-16611040 https://www.bbc.com/news/business-16611040
    - cortesoft 9y ago
      It means we shouldn't tie retirements to the company you are working for.
      - Jach 9y ago
        Who is "we"? I'm curious how you propose to do the math right so that you, as an employer, can offer a plan that resembles a pension, and if it ends up being any different in practice than contributing to a 401k (which does transfer with jobs so is independent of your company).
        cortesoft 9y ago
        'We' being society. I think we put too much responsibility onto companies, expecting them to provide health insurance and retirement benefits to employees. Both of those things should not be tied to your job.
  - Kalium 9y ago
    > You just can't underfund them or assume unrealistic stock market gains. You're absolutely correct. You cannot do these things and have functional DB plans. An issue arises when contemplating the incentives. Every person involved in the up-front planning for DB plans is incentivized to be wildly unrealistic about the future. It's not like anyone doing the negotiating will have any real consequences, so why not offer lower contributions to win your election / union approval / make quarterly numbers? DC plans have the distinct benefit of helping incentives align. It puts the costs on the balance sheet in the short term, and accountability is much more immediate. It's not a perfect compromise. For pretty much everyone, ideally run pensions are better. It's just that getting there has proven at best incredibly difficult and unreliable.
- logfromblammo 9y ago
  ...And then gradually reduced their employer contributions to said plans to a pittance, or even zero. At that point, you might as well do your own thing with Vanguard or Fidelity. The net result is the company got rid of the retirement plan, and started reselling other companies' commercial retirement plan products to their employees.
  - astura 9y ago
    Even if your employer's contribution is zero there's significant tax benefits for contributing to a 401(k) vs "doing your own thing with Vanguard or Fidelity." You can also "do your own thing with Vanguard or Fidelity" in an IRA, which has the tax benefits of a 401(k), however, the yearly contribution limits are unreasonably low, especially compared to a 401(k).
    - logfromblammo 9y ago
      Conceptually, the company is no longer contributing anything towards employee retirement. They are a transparent entity, ticking off the minimum requirements to realize the benefits from section 401(k), and don't do anything beyond telling the payroll company to divert X amount from the employee's paycheck, managed by that company, to their retirement fund account, managed by yet another company. If there is no employer contribution, you essentially already are doing your own thing, except with whomever your company picked to be the retirement benefits manager, instead of it being your own choice. So you create your own IRA at the company you pick, and roll over everything from your employer's 401(k) into it every time you switch jobs.
      - astura 9y ago
        Let me be clear: hallow retirement plans really grind my gears. So much so that I strongly believe they should be illegal, either offer a real retirement plan or don't offer one at all. Minimum employer contributions should absolutely be mandatory. I also think that IRA and 401(k) contribution limits should be combined, so none of this "$5,500 IRA limit and $18,500 401(k) limit," it should be "$24,000 combined 401(k)/IRA limit." I was just saying that if you are young and have $10,000 a year to save for retirement you are better off, from a tax perspective, saving $5,500 into an IRA and $4,500 in your hallow 401(k) rather than saving $5,500 into an IRA and $4,500 in your Fidelity brokerage account. That's it.
- plurgid 9y ago
  Sure, but the fuller picture is more like this. Nearly every major industrialized nation's infrastructure was bombed to hell after WW2, except America. To the victor went the spoils, and so our economy boomed to a much much greater degree than it would have otherwise. This lasted for a generation or two, and certain aspects of that capitalist feeding frenzy were enshrined as cultural values. The idea that there was a social contract between employers and employees, and that an average hard working American wouldn't be tossed out on the street if they got sick, would have a house to live in and would not have to toil in their old age, was baked into America. If you work hard and you're loyal, you'll be ok. However, where that was seen as a Governmental function after the Great Depression, in the boom years after WW2, the economy was simply flooded with money. When there's that much money and opportunity around, it's easy to start thinking that the Government was the problem. That the social contract would always remain, and that we could trust our bosses who we knew and worked with every day far more than some politically motivated government bureaucrat. Corporations bought the politicians. Then the politicians passed laws to make the bribery legal. Then slowly those post WW2 culturally enshrined easy answers became law. Now we have people seriously talking about "trickle down" economics as if it were a real thing. Because it was kinda like that in the 50's when we were the only major industrial powerhouse in the world. Now we've privatized nearly our entire healthcare system, because in the 50's hell, going to the doctor was cheap and how could that be anyone's problem but yours? And now we have no retirement plans other than "we will let you put some of your own money into the stock market tax free, but hey if the market tanks you're on your own bruh! (even though you had zippy control over that)" Again, because maybe that would have made sense in the 50's and 60's, and god knows if anything might have seemed true in that era it must be the word of God himself. The problem of course, is that now that the winning team picks the referees, there's pretty much no way out of this. The government SHOULD be providing healthcare, and decent retirement so that business doesn't have this burden. But then it'd be too easy to start new businesses. The referees picked by the last winning team aren't too keen on that.
  - RestlessMind 9y ago
    Thanks for the historical perspective. Now what about times before 1950's, when societies were typically /not/ flooded with money? You mention that "The government SHOULD be providing healthcare, and decent retirement". Was that the norm before 1950's anywhere? If yes, how did the math work out? I believe longer lifespans coupled with generous safety net provided by the government is a historical anomaly, propped up due to the growth spurt that happened post great depression + ww2. Now that things are reverting back to historical norms, we should rethink the way society is structured.
- wnissen 9y ago
  Pensions are cheaper than 401(k) accounts. I will say it again, this is simple actuarial math: Pensions are cheaper than 401(k)s. Three reasons: 1. Some people will die before they collect, others will live far longer. With a pension the former subsidize the latter, and everyone who needs income gets it. In a 401(k) everyone has to save like they're going to live forever, or risk running out of money. If you keep your withdrawal rate at 4%, you probably could live forever, but that means you need 25 times your salary saved. Twenty five years salary! A pension does not need nearly the same level of assets. 2. A pension can ride out a "bad" market because some people are paying in while others are paying out. In a 401(k) if you retired in 2009, you took a lifetime hit, even with a balanced portfolio. And you can get hit by a bad market and a long life at the same time! 3. Individual investors are morons. They buy overpriced funds and do a lousy job managing them. I am a moron, but at least I know it and invest accordingly. Vanguard did a huge study of all their individual retirement accounts, and number of trades that produced the best return was: zero. Every trade you make (statistically) is buying high and selling low. Pension managers aren't perfect, but they pay attention to expenses and don't chase the latest hot stock. Therefore you need much less of a contribution to fund a pension. It depends on how you assess these factors, but Joey Schmoe is going to have to save 15% or more of her salary to get the same retirement security as a pension contribution of 10%. A pension is only unaffordable if those contributions aren't made, and then a wave of retirements sets off an unsustainable withdrawal. But that's not a feature of defined benefit vs. defined contribution, rather it's governments who use shady accounting rather than making a small contribution annually. When you add in the fact that almost everyone who contributes to 401(k)s is well-off (half the population doesn't even have access), it is hard to imagine a method that is less likely to lead to comfortable retirements.
  - thewopr 9y ago
    This is super interesting and something I've never thought about. One other issue I have noticed with 401k's. Do 401k's exacerbate inter-generational income inequality? I know a number of people who are going to, in the next few decades, inherit very sizable 401k accounts. This is great, in that their parents were very frugal, saved well, and had comfortable retirements. But on the flip side, a pension would have died with that person, now there is this ongoing inter-generational transfer of wealth that otherwise wouldn't have occurred.
- rhizome 9y ago
  Totally unrelated to the continually growing multiple of executive compensation over employees, I'm sure.
- apercu 9y ago
  No, corporations shifted the risk to their workers.
wlesieutre 9y ago
Were those retirement plans fully funded over their years of employment, or were they kicking the can down the road with "We'll make big retirement promises and in 30 years when the $XXX,XXX,XXX bill comes due it'll be someone else's problem"?
- rossbmiller 9y ago
  I once saw an interesting research report comparing publicly traded companies based on their outstanding pension / retirement plan debt. The investment thesis was essentially advocating for shorting the companies with the largest under-funding of said plans, based on the assumption that a company that didn't give a crap about its employees probably wouldn't stand the test of time.
  - basementcat 9y ago
    Maybe said underfunded pension funds should buy large leveraged short positions in their parent companies and cash out after announcing an impending pension shortfall. This probably violates a bunch of SEC regulations.
icebraining 9y ago
It's not clear it would help you; a company could move part of your salary to a pension, but then your current life would be even more difficult. Essentially what you're saying is that you'd like to get a raise (more pension without a loss of salary). Well, wouldn't we all! Now for people who spend frivolously, forced savings might be helpful, but it's not clear to me why the companies should take that role; seems like a role for the State (and, in fact, that seems to be the rule in many countries, with mandatory pension plans).
presidentender 9y ago
> we had 5 kids and chose to have my wife stay at home for about 7 years You and your wife chose to have five children, and chose for her to work as a childcare provider, which we know is a low-paid gig. I'm very impressed that you managed to do that without going into debt, but I have little sympathy for other people who in similar situations find themselves struggling: the rest of us derive a smaller benefit from the continuation of your genetic legacy than you do, so it is appropriate that society should pay a smaller part of the cost of that lifestyle choice. People who fall into similar situations without your foresight might struggle more, but so too do people who buy expensive cars they can't afford or pursue careers they enjoy instead of careers that pay well.
- JaimeThompson 9y ago
  "hacker news becomes more interesting to people who want to have the sort of ideological conversations that eventually drown out the interesting stuff about tech and startups." Unless you are the one starting said ideological conversations?
  - presidentender 9y ago
    Your criticism is, on the surface of it, very relevant. The superficial hypocrisy of my earlier statement would really serve to hurt my credibility if this were a willfully polarized ideological bubble. The difference is that an on-topic reply to an on-topic comment on an on-topic post diverges as part of an ultimately topical and natural progression, whereas starting with a polarized and ideological post that has little to do with technology, startups, or spontaneous cleverness only serves as an opportunity to reinforce the poster's ideological outlook as the new normal; that is, to move the Overton window. I myself have been guilty of this. I told a friend of mine that I'd gotten some traction with a blog post about not getting hired by dropbox, and he asked me to share a really juvenile idea he'd had for protesting the TSA. I did it; the post was poorly received, and the community spanking was enough to remind me of what effective participation in a pseudonymous social news link aggregator looks like. That being said, neither did I start this conversation, nor was it the sort of ideological shouting that drowns out the interesting stuff. The grandparent has a good anecdote about the poster's experience with retirement planning and raising a lot of children, and it makes a point with which I happen to disagree. I voiced my disagreement without attacking the comment or the person who made it. Ultimately, I disagree both with your implied disagreement with my original point and with the validity of your rhetorical question, but I don't disagree with the topicality of your attack and therefore I don't think your comment deserves the downvote it has at present.
astura 9y ago
First off, you're mistaken. In general, baring disability, you don't collect a military retirement for under 20 years of service. You do get a TSP, but that's contributions made by the sailor, the Navy doesn't contribute to that.[1][2] Sounds like either your grandpa got military disability benefits, you misunderstood what a TSP was, or he might have even been lying to you.[3] You choose to drain your retirement early, if you didn't have that option (in other words, your employer controlled your retirement instead of you) you wouldn't magically get extra money to pay for cancer treatments - your retirement portion of your salary would just be unavailable for you to use. Just because you didn't use your retirement account for its intended purpose, that doesn't mean that defined contribution retirement plans are "broken." In general, its probably not a great idea to drain retirement accounts to pay for bills, as they have some protection from creditors... at least talk with a bankruptcy attorney beforehand. I would personally rather declare bankruptcy than drain my retirement accounts. It might just be me but I'd prefer controlling my money over my employer doing so, my employer might not even be around in five years. You can't prevent your employer from "investing" your retirement fund into Bernie Madoff's pyramid scheme[4], but you can prevent yourself from doing that. In the past I've worked at places where I don't trust upper management to make the right financial decisions. I'm glad I have a 401(k) because I can collect significant tax benefits from maxing it out. Your wife obviously isn't going to get a retirement saying home with the kids with or without employee controlled pension, so I don't understand what that complaint is about? Or how it relates to retirement accounts. In my opinion, if your employer offers a 401(k) they should be legally required to a) be opt out rather than opt in and b) be legally required to contribute some amount. That would fix some issues with people not prioritizing saving for retirement, however, unless you make draining your retirement account illegal then you aren't going to prevent people from doing dumb stuff.[5] [1] They have actually changed that recently, a few years ago they introduced a new defined TSP contribution option that you may opt into instead of the defined benefit option. [2] Some exceptions apply for war vets living in poverty [3] I'm so sorry to bring up that possibility, I don't want to be mean, but its a fact that most people who claim to be in the special forces are lying, its a common thing. [4] The NY Mets lost a bunch of money in Bernie Madoff's pyramid scheme. [5] Dumb stuff being the guy I know who cashed out his retirement account to buy furniture.
dominotw 9y ago
I have question regarding 'retirement plans' if you don't work for govt. 1. Do your retirement plans transfer between companies. 2. What happens to your retirement plan if the company goes down under.
- RandallBrown 9y ago
  1. Retirement plans aren't tied to companies necessarily. Usually the company contributes money into a bank account, that you keep after you leave the company. 2. Doesn't really matter as long as the bank with the account is still around. Once you leave the company, they no longer contribute to your retirement account. (I'm specifically talking about 401k retirement accounts.)
- ghaff 9y ago
  Assuming you're asking about traditional defined benefit pensions (as someone else answered for 401(k)s). 1. Not generally (ever?). This is one reason why traditional pensions are less attractive these days. Pensions were really a product of a world where someone worked for GM for their whole career or at least a long period of time. (Pensions tend to be constructed so that they rewarded long stints at one or two companies rather than short stints at a bunch of companies.) 2. It's probably safe. There's various legislation around private pensions and, at least as a last resort, the pension of a bankrupt company could be taken over by the Pension Benefit Guaranty Corp.
ptero 9y ago
Retirement plans at the time of your grandfathers started in a good state: low unfunded liabilities, high population growth and lower life expectancy after retirement than today. Thus such plans were generous. In fact, they now seem way too generous: paying such obligations accumulated large unfunded financial liabilities (6 trillion is an estimate I saw a few times), which shows them as unsustainable. This means that the pensions of your grandfathers paid a lot of money of your children, so their parents (us) struggle to fix this. The solution is not more of the same defined benefit schemes to stick our children with still bigger bills. We must do something else (defined contribution? variable benefit?)
- wolco 9y ago
  Fixed percent of company income put into a shared fund.
rconti 9y ago
"for the sake of profit" [citation needed] Maybe it was for the sake of actually being a going concern? I see no proof that this was ever sustainable (nor do I see proof that it absolutely wasn't, I'm just saying, what are the numbers involved?) Was the model ever solvent? Or did your grandfathers benefit from the money being pumped into the system during their successors' years, successors who would never have that same benefit? That said, the idea that you "don't have a choice" in saving for retirement (that is to say, perhaps a pension program that's less generous) has something going for it. There's a reason NFL players go bankrupt. None of us are particularly good at intuitively understanding future needs and planning for the future.

notyourday 9y ago

It is about choices. Having 5 kids was a choice.

pc86 9y ago

Corporations have not gotten rid of retirement plans, they've gotten rid of unsustainable defined benefit retirement plans (pensions) in exchange for defined contribution retirement plans (401ks).

cortesoft 9y ago
While I agree with you, I think it is important to note that defined benefit plans aren't INHERENTLY unsustainable. If you do the math right and are realistic, you can off them. You just can't underfund them or assume unrealistic stock market gains.
- lotsofpulp 9y ago
  They're unsustainable because they require the ability to predict what will happen in the world 10,20,30+ years into the future, a feat that no one is capable of, hence the decline of defined benefit pensions. Except for those that can lean on taxpayers to make up for the miscalculations and erroneous assumptions.
  - cortesoft 9y ago
    If it was true that we can't predict the future well enough to provide a fixed income, then annuities wouldn't be a thing. We are certainly capable of predicting the future well enough to do it, the problem is that current management often has an incentive to be too optimistic about future returns when deciding how much to fund a pension. Annuity companies don't have those rose colored glasses, so they do a better job.
    - sandworm101 9y ago
      >> then annuities wouldn't be a thing. Annuities are not pensions. They pay fixed amounts based on some interest rate. The difference is in the lifetime of the beneficiary. We all die eventually, normally befor hitting 100. Short of magic, that isn't going to change much. The difference with a defined benefit retirement plan is that the cost of benefits can rise drastically. Look at the difference in the cost of health care today and in 1960.
      - rileymat2 9y ago
        There are also inflation adjusted annuities. If you think this through, I don’t think you will see a dramatic difference.
  - Frondo 9y ago
    If no one can predict what will happen 10, 20, 30+ years in to the future, why is it okay when we're subjecting individuals' retirements to that same inability to predict the future?
    - lotsofpulp 9y ago
      Theoretically, so they have skin in the game and that would prevent the endemic fraud in taxpayer funded pensions like we have. Realistically, you should be cultivating social capital by way of raising a family or networking with useful people if you really want a secure future.
- Jach 9y ago
  What does the math look like to you? I mean, back when I was a teenager I realized that this century is different, I shouldn't expect to do what my dad did and end up (albeit through a series of acquisitions / mergers) at the same company for 30-something years with a payout plan at the end. Sometime in 2012 I saw this article[0] which starts off: "The average lifespan of a company listed in the S&P 500 index of leading US companies has decreased by more than 50 years in the last century, from 67 years in the 1920s to just 15 years today" I doubt things look any rosier 6 years later. So what does the math look like when the firm lifespan of the most profitable companies is quite a bit less than the lifespan of someone's useful working period? [0] https://www.bbc.com/news/business-16611040 https://www.bbc.com/news/business-16611040
  - cortesoft 9y ago
    It means we shouldn't tie retirements to the company you are working for.
    - Jach 9y ago
      Who is "we"? I'm curious how you propose to do the math right so that you, as an employer, can offer a plan that resembles a pension, and if it ends up being any different in practice than contributing to a 401k (which does transfer with jobs so is independent of your company).
      - cortesoft 9y ago
        'We' being society. I think we put too much responsibility onto companies, expecting them to provide health insurance and retirement benefits to employees. Both of those things should not be tied to your job.
- Kalium 9y ago
  > You just can't underfund them or assume unrealistic stock market gains. You're absolutely correct. You cannot do these things and have functional DB plans. An issue arises when contemplating the incentives. Every person involved in the up-front planning for DB plans is incentivized to be wildly unrealistic about the future. It's not like anyone doing the negotiating will have any real consequences, so why not offer lower contributions to win your election / union approval / make quarterly numbers? DC plans have the distinct benefit of helping incentives align. It puts the costs on the balance sheet in the short term, and accountability is much more immediate. It's not a perfect compromise. For pretty much everyone, ideally run pensions are better. It's just that getting there has proven at best incredibly difficult and unreliable.
logfromblammo 9y ago
...And then gradually reduced their employer contributions to said plans to a pittance, or even zero. At that point, you might as well do your own thing with Vanguard or Fidelity. The net result is the company got rid of the retirement plan, and started reselling other companies' commercial retirement plan products to their employees.
- astura 9y ago
  Even if your employer's contribution is zero there's significant tax benefits for contributing to a 401(k) vs "doing your own thing with Vanguard or Fidelity." You can also "do your own thing with Vanguard or Fidelity" in an IRA, which has the tax benefits of a 401(k), however, the yearly contribution limits are unreasonably low, especially compared to a 401(k).
  - logfromblammo 9y ago
    Conceptually, the company is no longer contributing anything towards employee retirement. They are a transparent entity, ticking off the minimum requirements to realize the benefits from section 401(k), and don't do anything beyond telling the payroll company to divert X amount from the employee's paycheck, managed by that company, to their retirement fund account, managed by yet another company. If there is no employer contribution, you essentially already are doing your own thing, except with whomever your company picked to be the retirement benefits manager, instead of it being your own choice. So you create your own IRA at the company you pick, and roll over everything from your employer's 401(k) into it every time you switch jobs.
    - astura 9y ago
      Let me be clear: hallow retirement plans really grind my gears. So much so that I strongly believe they should be illegal, either offer a real retirement plan or don't offer one at all. Minimum employer contributions should absolutely be mandatory. I also think that IRA and 401(k) contribution limits should be combined, so none of this "$5,500 IRA limit and $18,500 401(k) limit," it should be "$24,000 combined 401(k)/IRA limit." I was just saying that if you are young and have $10,000 a year to save for retirement you are better off, from a tax perspective, saving $5,500 into an IRA and $4,500 in your hallow 401(k) rather than saving $5,500 into an IRA and $4,500 in your Fidelity brokerage account. That's it.
plurgid 9y ago
Sure, but the fuller picture is more like this. Nearly every major industrialized nation's infrastructure was bombed to hell after WW2, except America. To the victor went the spoils, and so our economy boomed to a much much greater degree than it would have otherwise. This lasted for a generation or two, and certain aspects of that capitalist feeding frenzy were enshrined as cultural values. The idea that there was a social contract between employers and employees, and that an average hard working American wouldn't be tossed out on the street if they got sick, would have a house to live in and would not have to toil in their old age, was baked into America. If you work hard and you're loyal, you'll be ok. However, where that was seen as a Governmental function after the Great Depression, in the boom years after WW2, the economy was simply flooded with money. When there's that much money and opportunity around, it's easy to start thinking that the Government was the problem. That the social contract would always remain, and that we could trust our bosses who we knew and worked with every day far more than some politically motivated government bureaucrat. Corporations bought the politicians. Then the politicians passed laws to make the bribery legal. Then slowly those post WW2 culturally enshrined easy answers became law. Now we have people seriously talking about "trickle down" economics as if it were a real thing. Because it was kinda like that in the 50's when we were the only major industrial powerhouse in the world. Now we've privatized nearly our entire healthcare system, because in the 50's hell, going to the doctor was cheap and how could that be anyone's problem but yours? And now we have no retirement plans other than "we will let you put some of your own money into the stock market tax free, but hey if the market tanks you're on your own bruh! (even though you had zippy control over that)" Again, because maybe that would have made sense in the 50's and 60's, and god knows if anything might have seemed true in that era it must be the word of God himself. The problem of course, is that now that the winning team picks the referees, there's pretty much no way out of this. The government SHOULD be providing healthcare, and decent retirement so that business doesn't have this burden. But then it'd be too easy to start new businesses. The referees picked by the last winning team aren't too keen on that.
- RestlessMind 9y ago
  Thanks for the historical perspective. Now what about times before 1950's, when societies were typically /not/ flooded with money? You mention that "The government SHOULD be providing healthcare, and decent retirement". Was that the norm before 1950's anywhere? If yes, how did the math work out? I believe longer lifespans coupled with generous safety net provided by the government is a historical anomaly, propped up due to the growth spurt that happened post great depression + ww2. Now that things are reverting back to historical norms, we should rethink the way society is structured.
wnissen 9y ago
Pensions are cheaper than 401(k) accounts. I will say it again, this is simple actuarial math: Pensions are cheaper than 401(k)s. Three reasons: 1. Some people will die before they collect, others will live far longer. With a pension the former subsidize the latter, and everyone who needs income gets it. In a 401(k) everyone has to save like they're going to live forever, or risk running out of money. If you keep your withdrawal rate at 4%, you probably could live forever, but that means you need 25 times your salary saved. Twenty five years salary! A pension does not need nearly the same level of assets. 2. A pension can ride out a "bad" market because some people are paying in while others are paying out. In a 401(k) if you retired in 2009, you took a lifetime hit, even with a balanced portfolio. And you can get hit by a bad market and a long life at the same time! 3. Individual investors are morons. They buy overpriced funds and do a lousy job managing them. I am a moron, but at least I know it and invest accordingly. Vanguard did a huge study of all their individual retirement accounts, and number of trades that produced the best return was: zero. Every trade you make (statistically) is buying high and selling low. Pension managers aren't perfect, but they pay attention to expenses and don't chase the latest hot stock. Therefore you need much less of a contribution to fund a pension. It depends on how you assess these factors, but Joey Schmoe is going to have to save 15% or more of her salary to get the same retirement security as a pension contribution of 10%. A pension is only unaffordable if those contributions aren't made, and then a wave of retirements sets off an unsustainable withdrawal. But that's not a feature of defined benefit vs. defined contribution, rather it's governments who use shady accounting rather than making a small contribution annually. When you add in the fact that almost everyone who contributes to 401(k)s is well-off (half the population doesn't even have access), it is hard to imagine a method that is less likely to lead to comfortable retirements.
- thewopr 9y ago
  This is super interesting and something I've never thought about. One other issue I have noticed with 401k's. Do 401k's exacerbate inter-generational income inequality? I know a number of people who are going to, in the next few decades, inherit very sizable 401k accounts. This is great, in that their parents were very frugal, saved well, and had comfortable retirements. But on the flip side, a pension would have died with that person, now there is this ongoing inter-generational transfer of wealth that otherwise wouldn't have occurred.
rhizome 9y ago
Totally unrelated to the continually growing multiple of executive compensation over employees, I'm sure.
apercu 9y ago
No, corporations shifted the risk to their workers.

wlesieutre 9y ago

Were those retirement plans fully funded over their years of employment, or were they kicking the can down the road with "We'll make big retirement promises and in 30 years when the $XXX,XXX,XXX bill comes due it'll be someone else's problem"?

rossbmiller 9y ago
I once saw an interesting research report comparing publicly traded companies based on their outstanding pension / retirement plan debt. The investment thesis was essentially advocating for shorting the companies with the largest under-funding of said plans, based on the assumption that a company that didn't give a crap about its employees probably wouldn't stand the test of time.
- basementcat 9y ago
  Maybe said underfunded pension funds should buy large leveraged short positions in their parent companies and cash out after announcing an impending pension shortfall. This probably violates a bunch of SEC regulations.

icebraining 9y ago

It's not clear it would help you; a company could move part of your salary to a pension, but then your current life would be even more difficult. Essentially what you're saying is that you'd like to get a raise (more pension without a loss of salary). Well, wouldn't we all! Now for people who spend frivolously, forced savings might be helpful, but it's not clear to me why the companies should take that role; seems like a role for the State (and, in fact, that seems to be the rule in many countries, with mandatory pension plans).

presidentender 9y ago

> we had 5 kids and chose to have my wife stay at home for about 7 years You and your wife chose to have five children, and chose for her to work as a childcare provider, which we know is a low-paid gig. I'm very impressed that you managed to do that without going into debt, but I have little sympathy for other people who in similar situations find themselves struggling: the rest of us derive a smaller benefit from the continuation of your genetic legacy than you do, so it is appropriate that society should pay a smaller part of the cost of that lifestyle choice. People who fall into similar situations without your foresight might struggle more, but so too do people who buy expensive cars they can't afford or pursue careers they enjoy instead of careers that pay well.

JaimeThompson 9y ago
"hacker news becomes more interesting to people who want to have the sort of ideological conversations that eventually drown out the interesting stuff about tech and startups." Unless you are the one starting said ideological conversations?
- presidentender 9y ago
  Your criticism is, on the surface of it, very relevant. The superficial hypocrisy of my earlier statement would really serve to hurt my credibility if this were a willfully polarized ideological bubble. The difference is that an on-topic reply to an on-topic comment on an on-topic post diverges as part of an ultimately topical and natural progression, whereas starting with a polarized and ideological post that has little to do with technology, startups, or spontaneous cleverness only serves as an opportunity to reinforce the poster's ideological outlook as the new normal; that is, to move the Overton window. I myself have been guilty of this. I told a friend of mine that I'd gotten some traction with a blog post about not getting hired by dropbox, and he asked me to share a really juvenile idea he'd had for protesting the TSA. I did it; the post was poorly received, and the community spanking was enough to remind me of what effective participation in a pseudonymous social news link aggregator looks like. That being said, neither did I start this conversation, nor was it the sort of ideological shouting that drowns out the interesting stuff. The grandparent has a good anecdote about the poster's experience with retirement planning and raising a lot of children, and it makes a point with which I happen to disagree. I voiced my disagreement without attacking the comment or the person who made it. Ultimately, I disagree both with your implied disagreement with my original point and with the validity of your rhetorical question, but I don't disagree with the topicality of your attack and therefore I don't think your comment deserves the downvote it has at present.

astura 9y ago

First off, you're mistaken. In general, baring disability, you don't collect a military retirement for under 20 years of service. You do get a TSP, but that's contributions made by the sailor, the Navy doesn't contribute to that.[1][2] Sounds like either your grandpa got military disability benefits, you misunderstood what a TSP was, or he might have even been lying to you.[3] You choose to drain your retirement early, if you didn't have that option (in other words, your employer controlled your retirement instead of you) you wouldn't magically get extra money to pay for cancer treatments - your retirement portion of your salary would just be unavailable for you to use. Just because you didn't use your retirement account for its intended purpose, that doesn't mean that defined contribution retirement plans are "broken." In general, its probably not a great idea to drain retirement accounts to pay for bills, as they have some protection from creditors... at least talk with a bankruptcy attorney beforehand. I would personally rather declare bankruptcy than drain my retirement accounts. It might just be me but I'd prefer controlling my money over my employer doing so, my employer might not even be around in five years. You can't prevent your employer from "investing" your retirement fund into Bernie Madoff's pyramid scheme[4], but you can prevent yourself from doing that. In the past I've worked at places where I don't trust upper management to make the right financial decisions. I'm glad I have a 401(k) because I can collect significant tax benefits from maxing it out. Your wife obviously isn't going to get a retirement saying home with the kids with or without employee controlled pension, so I don't understand what that complaint is about? Or how it relates to retirement accounts. In my opinion, if your employer offers a 401(k) they should be legally required to a) be opt out rather than opt in and b) be legally required to contribute some amount. That would fix some issues with people not prioritizing saving for retirement, however, unless you make draining your retirement account illegal then you aren't going to prevent people from doing dumb stuff.[5] [1] They have actually changed that recently, a few years ago they introduced a new defined TSP contribution option that you may opt into instead of the defined benefit option. [2] Some exceptions apply for war vets living in poverty [3] I'm so sorry to bring up that possibility, I don't want to be mean, but its a fact that most people who claim to be in the special forces are lying, its a common thing. [4] The NY Mets lost a bunch of money in Bernie Madoff's pyramid scheme. [5] Dumb stuff being the guy I know who cashed out his retirement account to buy furniture.

dominotw 9y ago

I have question regarding 'retirement plans' if you don't work for govt. 1. Do your retirement plans transfer between companies. 2. What happens to your retirement plan if the company goes down under.

RandallBrown 9y ago
1. Retirement plans aren't tied to companies necessarily. Usually the company contributes money into a bank account, that you keep after you leave the company. 2. Doesn't really matter as long as the bank with the account is still around. Once you leave the company, they no longer contribute to your retirement account. (I'm specifically talking about 401k retirement accounts.)
ghaff 9y ago
Assuming you're asking about traditional defined benefit pensions (as someone else answered for 401(k)s). 1. Not generally (ever?). This is one reason why traditional pensions are less attractive these days. Pensions were really a product of a world where someone worked for GM for their whole career or at least a long period of time. (Pensions tend to be constructed so that they rewarded long stints at one or two companies rather than short stints at a bunch of companies.) 2. It's probably safe. There's various legislation around private pensions and, at least as a last resort, the pension of a bankrupt company could be taken over by the Pension Benefit Guaranty Corp.

ptero 9y ago

Retirement plans at the time of your grandfathers started in a good state: low unfunded liabilities, high population growth and lower life expectancy after retirement than today. Thus such plans were generous. In fact, they now seem way too generous: paying such obligations accumulated large unfunded financial liabilities (6 trillion is an estimate I saw a few times), which shows them as unsustainable. This means that the pensions of your grandfathers paid a lot of money of your children, so their parents (us) struggle to fix this. The solution is not more of the same defined benefit schemes to stick our children with still bigger bills. We must do something else (defined contribution? variable benefit?)

wolco 9y ago
Fixed percent of company income put into a shared fund.

rconti 9y ago

"for the sake of profit" [citation needed] Maybe it was for the sake of actually being a going concern? I see no proof that this was ever sustainable (nor do I see proof that it absolutely wasn't, I'm just saying, what are the numbers involved?) Was the model ever solvent? Or did your grandfathers benefit from the money being pumped into the system during their successors' years, successors who would never have that same benefit? That said, the idea that you "don't have a choice" in saving for retirement (that is to say, perhaps a pension program that's less generous) has something going for it. There's a reason NFL players go bankrupt. None of us are particularly good at intuitively understanding future needs and planning for the future.