7 ms·

Become a good strategy? Pensions for government workers have been a thing for a very long time.

by mhb 8y ago

jjaredsimpson 8y ago
Pensions are fine if employers accurately discount present wages for the expected payment of future wages, and accurately forecast future population growth to maintain a good ratio of workers to retirees. Some governments seem to be quite bad at this though. States differ in pension liabilities and I haven't looked at the federal level.
- 3pt14159 8y ago
  It isn't that governments are bad at it, its that they have incentives to fuck it up. It's much easier politically to give the union what it wants and let it be some mess someone cleans up in 20 or 40 years. Only if the electorate is intelligent / educated enough to call bullshit do they temper their bullshitery.
  - leereeves 8y ago
    The electorate prefers to be distracted by Buzz Aldrin's facial ticks, Pence's water bottle, and a fake Meliana blow up doll instead of having a serious discussion about the consequences of policy today, let alone 20 years from now. (Just three recent examples of the nonsense of the day. Yesterday or tomorrow, different nonsense, but always nonsense over serious discussion.)
- mhb 8y ago
  Probably some governments are bad at it because knowing what will happen in the future, which you need to in order to keep a defined benefit plan solvent, is impossible. Other governments/employers were luckier. But it's not so hard to say that you can do it.
ebbv 8y ago
Pensions are not inherently a problem any more than any other form of retirement account is. HN should be above this kind of ignorant rhetoric.
- xyzzyz 8y ago
  Of course they are more of a problem, just like a mortgage is more risky than saving up to buy a house with cash upfront — pensions create a long term liability in a way that putting cash in employee 401k doesn’t. Even more importantly, with pensions you’re taking a mortgage that is deferred for a few decades, and someone else than you will be responsible for paying it off — by the time the pension benefits come to mature, people who made the deal are long gone, and won’t take any responsibility. It gives them an incentive to make a bad deal to make pensioners happy now, and let someone else deal with the problem of funding them later on.
  - Retric 8y ago
    Unfunded pensions do that, but the government could easily mandate all pensions are 110% fully funded. Really, it's an issue of policy not pensions.
    - snarf21 8y ago
      I'd disagree. Fully funded would probably look more like 300% of what is expected. People are living longer. If healthcare is included in the pension, it is a variable cost we can't even measure in terms of future cost. Additionally, pension have to be managed and administrated. This is pure wasted money. Every pensioner would be better off taking the money that is set aside for their part of the pool and putting it in a Vanguard index fund. When you start to withdraw, you know how much you have left and you haven't paid tons of kickbacks along the way. When there is a recession, you can scale back your withdraws until there is a recovery, etc. Fixed benefit pensions can never be anything but a pyramid scheme. Otherwise, your pension would be more by doing what I state above because the administration is near zero. The pension funds have never done better than the S&P over any reasonable time window. Pensions will always have unnecessary overhead.

Become a good strategy? Pensions for government workers have been a thing for a very long time.

by mhb 8y ago

Become a good strategy? Pensions for government workers have been a thing for a very long time.

Pensions are fine if employers accurately discount present wages for the expected payment of future wages, and accurately forecast future population growth to maintain a good ratio of workers to retirees. Some governments seem to be quite bad at this though. States differ in pension liabilities and I haven't looked at the federal level.

3pt14159 8y ago
It isn't that governments are bad at it, its that they have incentives to fuck it up. It's much easier politically to give the union what it wants and let it be some mess someone cleans up in 20 or 40 years. Only if the electorate is intelligent / educated enough to call bullshit do they temper their bullshitery.
- leereeves 8y ago
  The electorate prefers to be distracted by Buzz Aldrin's facial ticks, Pence's water bottle, and a fake Meliana blow up doll instead of having a serious discussion about the consequences of policy today, let alone 20 years from now. (Just three recent examples of the nonsense of the day. Yesterday or tomorrow, different nonsense, but always nonsense over serious discussion.)
mhb 8y ago
Probably some governments are bad at it because knowing what will happen in the future, which you need to in order to keep a defined benefit plan solvent, is impossible. Other governments/employers were luckier. But it's not so hard to say that you can do it.

ebbv 8y ago

Pensions are not inherently a problem any more than any other form of retirement account is. HN should be above this kind of ignorant rhetoric.

xyzzyz 8y ago
Of course they are more of a problem, just like a mortgage is more risky than saving up to buy a house with cash upfront — pensions create a long term liability in a way that putting cash in employee 401k doesn’t. Even more importantly, with pensions you’re taking a mortgage that is deferred for a few decades, and someone else than you will be responsible for paying it off — by the time the pension benefits come to mature, people who made the deal are long gone, and won’t take any responsibility. It gives them an incentive to make a bad deal to make pensioners happy now, and let someone else deal with the problem of funding them later on.
- Retric 8y ago
  Unfunded pensions do that, but the government could easily mandate all pensions are 110% fully funded. Really, it's an issue of policy not pensions.
  - snarf21 8y ago
    I'd disagree. Fully funded would probably look more like 300% of what is expected. People are living longer. If healthcare is included in the pension, it is a variable cost we can't even measure in terms of future cost. Additionally, pension have to be managed and administrated. This is pure wasted money. Every pensioner would be better off taking the money that is set aside for their part of the pool and putting it in a Vanguard index fund. When you start to withdraw, you know how much you have left and you haven't paid tons of kickbacks along the way. When there is a recession, you can scale back your withdraws until there is a recovery, etc. Fixed benefit pensions can never be anything but a pyramid scheme. Otherwise, your pension would be more by doing what I state above because the administration is near zero. The pension funds have never done better than the S&P over any reasonable time window. Pensions will always have unnecessary overhead.