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Pension plans don’t really make economic sense. Fortunately, private pensions will soon become a thing of the past. Of course, the only reason they ever were a

by smabie 7y ago

Pension plans don’t really make economic sense. Fortunately, private pensions will soon become a thing of the past. Of course, the only reason they ever were a thing was due to tax breaks, but that’s a different story.

ixtli 7y ago
They don’t make economic sense when the only economic concern is to generate private wealth for the owner of the company and it shareholders at a consistent year-over-year rate. If your economic concern includes growing a middle class that is motivated to spend money and to take business risks then they make a lot of sense.
- lotsofpulp 7y ago
  They don't make sense because calculations for pension liabilities require knowing economic conditions decades into the future. I have yet to come across someone that prescient.
  - apendleton 7y ago
    This is true for any way of providing for retirement, though. Eliminating pensions just transfers the risk from companies to individuals. It's clear why companies would want this, but not clear it's societally beneficial.
    - lotsofpulp 7y ago
      The best model I've seen is to raise families that stick together, and support each other. As parents age, children and cousins support them, and they age, so on and so forth. Unfortunately, this requires a lot of compromise, and I see that once financial independence is achieved, it is difficult for families to continue this way of life. There's also other facets of modern life that may not be conducive to this lifestyle.
      - ixtli 7y ago
        generational wealth is how real wealth is built: nearly all riches are inherited. the main thing i have learned with age is how incredibly important having a very very strong support system is, whether thats family, friends, a club, school, spouse, children, or whatever. you can. not. survive. without this. Its disconcerting how completely i overlooked this in my youth. independence in the context you describe is not something that should be lauded in our society and specifically parents that drive their children away should, in the great majority of cases, be vilified along with the typical narrative of celebrating the child's victory at overcome adverse conditions.
        redis_mlc 7y ago
        > how incredibly important having a very very strong support system is Agreed. Try recovering from surgery alone sometime to find out!
  - ixtli 7y ago
    this is a great refutation of the current status quo where people are required to plan decades into the future for their own retirements. indeed no one is capable of this.
xxpor 7y ago
They're good for people who have trouble saving themselves, which is a huge proportion of the population. Just look at all of the people who are excited to get a huge tax refund, then immediately spend it all.
SketchySeaBeast 7y ago
The unfortunate part about this is there now needs to be some relatively easy system laid out for people to plan their retirement. I don't know the exact numbers, but a quick google[1] told me 35% of American's don't have access to 401k's - it's probably those people who also need help planning to retire the most. And of those people, I'm not sure how many are actually on track to ever retire. I understand there's a general bootstrap mentality, but it's hard to see how 100,000,000 people not having retirement savings is going to work out well. https://www.cnbc.com/2018/03/12/how-many-americans-dont-have-access-to-a-401k.html https://www.cnbc.com/2018/03/12/how-many-americans-dont-have...
- gizmo686 7y ago
  Private pensions don't solve this, in that they were still only available to those whose employers offered them. For the most part pensions were replaced with 401ks, so there was no significant loss of access to retirement product. To your concern about lack of access, the solution is simple: raise the cap on IRAs. This still doesn't solve the nudge problem, where people are less likely to sign up withou HR emailing an enrolment form every year. There is also probably a correlation between people without 401k access, and those who would not be reaching the current IRA cap anyway.
- ghaff 7y ago
  Well, there are: 1. IRAs 2. Savings that aren't tax-advantaged So it's not like not having access to 401k's keeps people from retirement savings. That said, 401k's are nice from a tax perspective and, even though they're still usually opt-in, are at least as straightforward as anything that requires affirmatively making a choice can be. But, yes, although they have downsides defined-benefit plans were effectively a form of forced savings for long-term employees in large organizations.

by smabie 7y ago

ixtli 7y ago

They don’t make economic sense when the only economic concern is to generate private wealth for the owner of the company and it shareholders at a consistent year-over-year rate. If your economic concern includes growing a middle class that is motivated to spend money and to take business risks then they make a lot of sense.

lotsofpulp 7y ago
They don't make sense because calculations for pension liabilities require knowing economic conditions decades into the future. I have yet to come across someone that prescient.
- apendleton 7y ago
  This is true for any way of providing for retirement, though. Eliminating pensions just transfers the risk from companies to individuals. It's clear why companies would want this, but not clear it's societally beneficial.
  - lotsofpulp 7y ago
    The best model I've seen is to raise families that stick together, and support each other. As parents age, children and cousins support them, and they age, so on and so forth. Unfortunately, this requires a lot of compromise, and I see that once financial independence is achieved, it is difficult for families to continue this way of life. There's also other facets of modern life that may not be conducive to this lifestyle.
    - ixtli 7y ago
      generational wealth is how real wealth is built: nearly all riches are inherited. the main thing i have learned with age is how incredibly important having a very very strong support system is, whether thats family, friends, a club, school, spouse, children, or whatever. you can. not. survive. without this. Its disconcerting how completely i overlooked this in my youth. independence in the context you describe is not something that should be lauded in our society and specifically parents that drive their children away should, in the great majority of cases, be vilified along with the typical narrative of celebrating the child's victory at overcome adverse conditions.
      - redis_mlc 7y ago
        > how incredibly important having a very very strong support system is Agreed. Try recovering from surgery alone sometime to find out!
- ixtli 7y ago
  this is a great refutation of the current status quo where people are required to plan decades into the future for their own retirements. indeed no one is capable of this.

xxpor 7y ago

They're good for people who have trouble saving themselves, which is a huge proportion of the population. Just look at all of the people who are excited to get a huge tax refund, then immediately spend it all.

SketchySeaBeast 7y ago

The unfortunate part about this is there now needs to be some relatively easy system laid out for people to plan their retirement. I don't know the exact numbers, but a quick google[1] told me 35% of American's don't have access to 401k's - it's probably those people who also need help planning to retire the most. And of those people, I'm not sure how many are actually on track to ever retire. I understand there's a general bootstrap mentality, but it's hard to see how 100,000,000 people not having retirement savings is going to work out well. https://www.cnbc.com/2018/03/12/how-many-americans-dont-have-access-to-a-401k.html https://www.cnbc.com/2018/03/12/how-many-americans-dont-have...

gizmo686 7y ago
Private pensions don't solve this, in that they were still only available to those whose employers offered them. For the most part pensions were replaced with 401ks, so there was no significant loss of access to retirement product. To your concern about lack of access, the solution is simple: raise the cap on IRAs. This still doesn't solve the nudge problem, where people are less likely to sign up withou HR emailing an enrolment form every year. There is also probably a correlation between people without 401k access, and those who would not be reaching the current IRA cap anyway.
ghaff 7y ago
Well, there are: 1. IRAs 2. Savings that aren't tax-advantaged So it's not like not having access to 401k's keeps people from retirement savings. That said, 401k's are nice from a tax perspective and, even though they're still usually opt-in, are at least as straightforward as anything that requires affirmatively making a choice can be. But, yes, although they have downsides defined-benefit plans were effectively a form of forced savings for long-term employees in large organizations.