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No. The real risk is not in the present, the real risk is outliving your retirement savings. You can predict how long a population will live, you cannot predi
by rileymat2 8y ago
No.
The real risk is not in the present, the real risk is outliving your retirement savings.
You can predict how long a population will live, you cannot predict whether a single person will need 5 or 40 years of retirement savings. Collective defined benefit plans mitigate this risk and are the only thing that really make sense.
They also end up cheaper because instead of each person needing to save the amount needed until the end of retirement, the group only needs to save the amount that the average person will need.
- tome 8y agoIn the UK you can buy an annuity with the proceeds of your pension fund at retirement. Is the same not true of a 401(k) in the US?
- AlexTWithBeard 8y agoThere's always a risk an annuity provider will go bust.
- jnwatson 8y agoThere's also a risk of a meteor hitting the earth. The likelihood is very low.
- rileymat2 8y agoYes, a variety of products exist in the U.S. But when I did limited research in the past, I found high fees and low returns.
- nradov 8y agoLow returns are inevitable for low-risk investments in a ZIRP environment. This is not an argument in favor of pensions.
- sillypuddy 8y agoYes, they're available. They're are also used to compare how much a fixed pension would cost in present dollars.
- lozenge 8y agoWhat happens when there isn't enough money to pay the benefit? As you say, due to increasing life expectancy. Both social security and employer held pensions have to cut their payouts, but only one of them is democratic and has even a chance of being run in the interests of the beneficiaries. "The group only needs to save the amount the average person will need" - the same is true if you buy an annuity. Or, give people preferential tax treatment for keeping money in their pension post retirement, don't let their family inherit it.