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I might say that Pension plan are the most effective ways to encourage long-term savings among employees.

JKCalhoun 6y ago
Would you trust a pension plan though? I feel like my entire life I've read about companies going belly up, raided by vulture capitalists, and in the end a court determines that the pensioners get nothing and have no case.
- OldHand2018 6y ago
  You’re reading about an extremely small subset of companies with pensions. However, they serve as a very cautionary tale: pensions do not have zero risk. They are very far from it. I’m not sure if I’ve ever seen a risk comparison between defined benefit (pension) and defined contribution (401k) plans. I’d suspect that the defined benefit risk is lower, but not by much. There are two main problems with pensions that I see: 1. The longer you work someplace, the more locked in you are. Pensions are structured such that working at the same place for 40 years is better than working at four different places for 10 years each, even if you get paid the exact same salary. 2. When you die, your children get nothing. With the 401k, whatever your balance is goes to your heirs. You can argue that it is better for society for your children to get nothing: that is a valid point of view. But we have a system in place where some people pass on assets to their children and others do not, and the differentiator between the two is the employer. That’s crazy, and the only logical way to play this game is to be on the winning side.
- yohannparis 6y ago
  Everything has an inherent risk. But I would prefer an insured and well-managed pension plan that cannot be touched but the company than a personal 401k. Not everybody wants to play wall street games to insure a good retirement plan. I would prefer pay someone to do it.
closeparen 6y ago
In 50 years will you buy Tesla out of obligation to your elders with Tesla pensions? Or will you buy from a new company with lower prices and better R&D because it doesn’t have pension obligations to pay yet?
- StillBored 6y ago
  Why are you repeating this propaganda? Pensions are basically just 401k's with the risk spread over a larger pool. You know like insurance. A well run pension assumes a conservative rate of return, a conservative inflation and a life expectancy. Then it funds at a level needed to assure a fixed payout to a portion of its workers. No differently than a 401k, except that its a larger pool capable of absorbing market downturns that happen while people are drawing on it just as it absorbs higher returns. The problem with many of the US pensions were that they were seen as places to raid, or underfunded to gain a slightly better quarterly number, or they were intentionally screwed by wallstreet banks who sold them assets with fixed rates of returns they knew were false. AKA pension plans have been the target of all kinds of fraud, very little of which has been prosecuted. And then there was the propoganda. Which worked really well. Hey do you want a pension which will pay you 50% of your salary for the rest of your life or this $50 a month which will grow at 8% a year and you will retire with $ million dollars you can do anything with? The business were much happier to cut their pension obligations and match their workers with a far less substantial 401k benefits. Giving your workers $2k a year in 401k matches without any future risk looks a lot better on the balance sheet than putting $5k in a pension for them and assuming the risk that it will be enough to keep them from depending on government handouts.
  - jsight 6y ago
    > Giving your workers $2k a year in 401k matches without any future risk looks a lot better on the balance sheet than putting $5k in a pension for them and assuming the risk that it will be enough to keep them from depending on government handouts. I feel like this sentence undermined the rest of them. Even giving them $5k would be better for everyone involved, as now the company wouldn't have to assume the risk and the employee would be able to direct their own investment.

Would you trust a pension plan though? I feel like my entire life I've read about companies going belly up, raided by vulture capitalists, and in the end a court determines that the pensioners get nothing and have no case.

OldHand2018 6y ago
You’re reading about an extremely small subset of companies with pensions. However, they serve as a very cautionary tale: pensions do not have zero risk. They are very far from it. I’m not sure if I’ve ever seen a risk comparison between defined benefit (pension) and defined contribution (401k) plans. I’d suspect that the defined benefit risk is lower, but not by much. There are two main problems with pensions that I see: 1. The longer you work someplace, the more locked in you are. Pensions are structured such that working at the same place for 40 years is better than working at four different places for 10 years each, even if you get paid the exact same salary. 2. When you die, your children get nothing. With the 401k, whatever your balance is goes to your heirs. You can argue that it is better for society for your children to get nothing: that is a valid point of view. But we have a system in place where some people pass on assets to their children and others do not, and the differentiator between the two is the employer. That’s crazy, and the only logical way to play this game is to be on the winning side.
yohannparis 6y ago
Everything has an inherent risk. But I would prefer an insured and well-managed pension plan that cannot be touched but the company than a personal 401k. Not everybody wants to play wall street games to insure a good retirement plan. I would prefer pay someone to do it.

closeparen 6y ago

In 50 years will you buy Tesla out of obligation to your elders with Tesla pensions? Or will you buy from a new company with lower prices and better R&D because it doesn’t have pension obligations to pay yet?

StillBored 6y ago
Why are you repeating this propaganda? Pensions are basically just 401k's with the risk spread over a larger pool. You know like insurance. A well run pension assumes a conservative rate of return, a conservative inflation and a life expectancy. Then it funds at a level needed to assure a fixed payout to a portion of its workers. No differently than a 401k, except that its a larger pool capable of absorbing market downturns that happen while people are drawing on it just as it absorbs higher returns. The problem with many of the US pensions were that they were seen as places to raid, or underfunded to gain a slightly better quarterly number, or they were intentionally screwed by wallstreet banks who sold them assets with fixed rates of returns they knew were false. AKA pension plans have been the target of all kinds of fraud, very little of which has been prosecuted. And then there was the propoganda. Which worked really well. Hey do you want a pension which will pay you 50% of your salary for the rest of your life or this $50 a month which will grow at 8% a year and you will retire with $ million dollars you can do anything with? The business were much happier to cut their pension obligations and match their workers with a far less substantial 401k benefits. Giving your workers $2k a year in 401k matches without any future risk looks a lot better on the balance sheet than putting $5k in a pension for them and assuming the risk that it will be enough to keep them from depending on government handouts.
- jsight 6y ago
  > Giving your workers $2k a year in 401k matches without any future risk looks a lot better on the balance sheet than putting $5k in a pension for them and assuming the risk that it will be enough to keep them from depending on government handouts. I feel like this sentence undermined the rest of them. Even giving them $5k would be better for everyone involved, as now the company wouldn't have to assume the risk and the employee would be able to direct their own investment.