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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.

by ebbv 8y ago

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.
    - Retric 8y ago
      Pensions actually provide a massive benifit in that they don't provide dead people money. You can say I will be fine if I run out of money at age X, but when you start talking about 100 million people you get a large number that make it past that. Also, fully funded is only fully funded when it can survive the company going bankrupt tomorrow. People like to redefine it as liability less than X, but that just means underfunded. Granted, if you have kids you might want the leftovers from your retirement to go to them, but that's not a social problem. Further becase pensions take less money so a subset can always just buy life insurance. PS: The biggest issue is benifits not including inflation, but again that's a policy issue.
- sykh 8y ago
  ...pensions create a long term liability in a way that putting cash in employee 401k doesn’t. Assuming we don’t want to live in a society in which vast numbers of elderly live in penury this isn’t true. It’s well known that when retirement savings are the responsibility of the emoloyee then they don’t save enough. What you say about bad governance is certainly true and incompetent or badly incentivized leadership will exacerbate problems. I don’t know what the solution is for the U.S. but the current system is going to make us end up with a society with large numbers of destitute elderly. Shifting the onus to the employee via 401Ks is just kicking the can down the road so to speak. It also allows politicians and voters off the hook because the liabilities aren’t on the books. On paper it looks good but the reckoning will occur.
  - ethbro 8y ago
    Not to mention shifting responsibility on the management side from professionals to citizens. (There are a lot of arguments to be quibbled over here, but when the average American can't calculate interest I'm not going to point to them as the best steward of their retirement)
- ebbv 8y ago
  This is nonsense. Pensions should be and used to be funded when they were set up. The issue is that greedy, irresponsible politicians (many of whom claim to be conservatives) plundered them like piggy banks.
mywittyname 8y ago
Not if they are fully funded. But the issue is that most pensions systems are woefully underfunded, thus, are a huge risk. If pension payouts floated as a percentage of overall asset value, then they would a great retirement strategy. But promising people a guaranteed (generous) fixed-income is not sustainable in the long-term.
- ebbv 8y ago
  The only reason pensions are underfunded is that they were plundered. Hold the politicians that broke them responsible, not the workers who earned their benefits.
ravenscrow 8y ago
> Pensions are not inherently a problem any more than any other form of retirement account is. Sure it is. It's inherently problematic because it assumes perpetual growth of population and economy. Also, there is a difference between pensions and 401ks and IRAs. 401ks/IRAs will run out. Pensions can never run out. In other words, you can outlive your 401ks/IRAs, but you can't outlive your pension. Or put it simply, with 401k/IRAs, you can't take out more than you put in. With pensions, you can if you live long enough. So who makes up the difference? The workers or taxpayers.

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.

by 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.
  - Retric 8y ago
    Pensions actually provide a massive benifit in that they don't provide dead people money. You can say I will be fine if I run out of money at age X, but when you start talking about 100 million people you get a large number that make it past that. Also, fully funded is only fully funded when it can survive the company going bankrupt tomorrow. People like to redefine it as liability less than X, but that just means underfunded. Granted, if you have kids you might want the leftovers from your retirement to go to them, but that's not a social problem. Further becase pensions take less money so a subset can always just buy life insurance. PS: The biggest issue is benifits not including inflation, but again that's a policy issue.
sykh 8y ago
...pensions create a long term liability in a way that putting cash in employee 401k doesn’t. Assuming we don’t want to live in a society in which vast numbers of elderly live in penury this isn’t true. It’s well known that when retirement savings are the responsibility of the emoloyee then they don’t save enough. What you say about bad governance is certainly true and incompetent or badly incentivized leadership will exacerbate problems. I don’t know what the solution is for the U.S. but the current system is going to make us end up with a society with large numbers of destitute elderly. Shifting the onus to the employee via 401Ks is just kicking the can down the road so to speak. It also allows politicians and voters off the hook because the liabilities aren’t on the books. On paper it looks good but the reckoning will occur.
- ethbro 8y ago
  Not to mention shifting responsibility on the management side from professionals to citizens. (There are a lot of arguments to be quibbled over here, but when the average American can't calculate interest I'm not going to point to them as the best steward of their retirement)
ebbv 8y ago
This is nonsense. Pensions should be and used to be funded when they were set up. The issue is that greedy, irresponsible politicians (many of whom claim to be conservatives) plundered them like piggy banks.

mywittyname 8y ago

Not if they are fully funded. But the issue is that most pensions systems are woefully underfunded, thus, are a huge risk. If pension payouts floated as a percentage of overall asset value, then they would a great retirement strategy. But promising people a guaranteed (generous) fixed-income is not sustainable in the long-term.

ebbv 8y ago
The only reason pensions are underfunded is that they were plundered. Hold the politicians that broke them responsible, not the workers who earned their benefits.

ravenscrow 8y ago

> Pensions are not inherently a problem any more than any other form of retirement account is. Sure it is. It's inherently problematic because it assumes perpetual growth of population and economy. Also, there is a difference between pensions and 401ks and IRAs. 401ks/IRAs will run out. Pensions can never run out. In other words, you can outlive your 401ks/IRAs, but you can't outlive your pension. Or put it simply, with 401k/IRAs, you can't take out more than you put in. With pensions, you can if you live long enough. So who makes up the difference? The workers or taxpayers.