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A pension pays you a fixed rate per year until you die. Very different from a 401k. And that is why all these government entities have such hefty pension respon
by socialist_coder 6y ago
A pension pays you a fixed rate per year until you die. Very different from a 401k. And that is why all these government entities have such hefty pension responsibilities. It seems absolutely stupid. Like, just do the math. What did these people think were going to happen 50 years down the road?
- jfengel 6y agoFor a number of years, it was a tactic for resolving impasses between labor and management. Labor would accept a lower salary in exchange for a pension -- funded by expected growth rather than an investment account. Everybody wins. Workers get a safe retirement. Management gets to hold the line on salaries. Oops. It might even have worked, if growth had continued the way it did in the 50s and 60s, where there was often 5% GDP growth. Then came the 80s. Things have leveled off at a reasonable 2% growth, but that's not enough to support all of these pensions. But the pension plans were promises, and not contingent on that. So it's not quite as stupid as it sounded. But it's still pretty stupid. Everybody thought they were taking advantage of the other side.