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Ok. But even with a sensible investment strategy a major economic decline close to your retirement can result in you getting a lot less than you expected, right

• ghaff 7y ago
  The thing is that pensions aren't magic money trees. They're invested in the market just like anything else. So if there's a major economic decline close to your retirement, they may well become insolvent. Maybe they'll be bailed out (with basically other people's money) or maybe they won't be. (Pensions also don't really protect you if inflation spikes.) Individual investors do have the option of investing in things like treasuries and annuities. Of course, in an economic collapse, all bets are off. But if you're willing to put up with low returns (maybe 3%), you can invest your money pretty safely.
  • dredmorbius 7y ago
    DB pensions spread their risk and return over multiple cohorts. DC retirement plans heap all correlated market risk on individual retirees. Given that the risks of an underfunding are greater than an overfunding, that market returns are exogenous to the merits of any given retiree, and the goal is to supply adequate income to live on in retirement, the arguments in favour of a DB plan, a payment mandate by the employer, a government backing, and severe penalties for malfeasance, including clawbacks to investors and creditors of deadbeat employers, seems more than appropriate.