6 ms·

Is it really as political as that as in "the big bad republicans ate my pension"? Juicy pensions are on the decline everywhere. The company I started working

Is it really as political as that as in "the big bad republicans ate my pension"? Juicy pensions are on the decline everywhere. The company I started working for at age 23, so many years ago, in all its vertically integrated, multinational glory, provided, at the time, pensions you really could continue living a middle class lifestyle on. I duly got into that pension plan, with the huge pension adjustments that entailed (greatly reduced ability to pay into your RRSP) but that future defined benefit pension was worth it. Except that $bigco went bust, and when the dust settled, we got cash payout of the some percentage of the deemed value of the accrued pension that they could recover from the financial wreckage, and that was that. No pension at all. Now I and everyone else is just on defined contribution plans, where between your own and the company's contribution you put in maybe 10% of what it would take to live on, per year. The rest is supposed to miraculously come from compound gains, using the old wisdom that anyone can get 10% per year without effort. What does that mean in real life terms? Live cheap, far below your financial means - one basic car instead of his & hers SUVs, a basic house in a decent neighbourhood instead of the latest 5K square feet monstrosity and so on, and try to save a good 1/3 of your income for the future. Barring a financial meltdown or runaway inflation, I think we'll make it. The fact that "runaway healthcare costs" are not a factor here helps a lot, though without a company plan, you're on your own for all dental work and (up to a certain age) all prescription drug costs. Anyway the economics is simply this: Work for 40-45 years and accrue enough to live another average 25 years after you retire. The $$ have to come from somehwere. You see a lot about super juicy public sector pensions in the USA where people can retire in luxury before age 50... probably outliers, as is the "evil people stole the pension fund" situations. On the whole, it's just that people live longer.

toomuchtodo 5y ago
The US workforce (at the time) was sold on 401ks as a replacement for pensions, when they’re really for only the highest compensation earners as a tax dodge [1]. Predictably, very few made enough to contribute to a 401k in a manner that would replace the safety of pensions, and now large cohorts nearing retirement are left with little while shareholders captured profits that previously contributed towards funding pensions. Tada! [1] https://news.ycombinator.com/item?id=21827154 https://news.ycombinator.com/item?id=21827154
- an_opabinia 5y ago
  > shareholders captured what previously funded pensions Hmm, but passive retiree investors, on whose behalf all those institutions like Blackrock are ultimately investing, have probably contributed enormously to a rise in asset values. Shareholders gain a lot from people dumbly saving in investment vehicles, whether pensions or 401ks.
  - ItsMonkk 5y ago
    Interestingly enough, net flows of those funds are negative[0] as more and more retirees pull to fund their retirement. The only thing keeping the stock market rising at the moment is in all the buybacks keeping demand up and supply down. [0, page 11]: https://www.goldmansachs.com/insights/pages/top-of-mind/buyback-realities/report.pdf https://www.goldmansachs.com/insights/pages/top-of-mind/buyb...
    - missedthecue 5y ago
      The total amount of buybacks in 2020 was less than $500 billion, but almost $35 trillion in shares were traded. How is it mathematically possible that buybacks are the only thing keeping it afloat?
      - deleted 5y ago
        [deleted]
- Afforess 5y ago
  Agree. 401ks were never intended to be a complete retirement plan or pension replacement, and are frankly untested at the scale that they are now being used for. It's a little scary that a tiny carveout of the larger IRS code for pensions was turned into the defacto retirement plan for Americans. https://en.wikipedia.org/wiki/401(k)#History https://en.wikipedia.org/wiki/401(k)#History
  - bradleyjg 5y ago
Spooky23 5y ago
During the 80s, get tough on crime politics mushroomed pensions and healthcare obligations because state/local governments lacked the cash flow for raises during higher inflation times. Police and fire pensions usually drive this stuff because overtime assigned by seniority spikes salaries and pensions. The “evil republican” angle is that “fiscally conservative” politicians usually balanced budgets by cutting pension contributions or buying support by reducing local contributions during tight budget times. Democratic legislators and governors did this too, but this type of fiscal behavior is a “conservative” trademark. States like New York have mostly funded pensions, even with generous pension plans. The “secret” is easy - governments, especially local governments have to pay.
- xyzzyz 5y ago
  > States like New York have mostly funded pensions, even with generous pension plans. What exactly do you mean by "states like New York" here? What is it New York-like that makes place have funded pensions? For comparison, two of the New York neighbors, which arguably are most similar states to New York, both culturally and politically, that is, New Jersey and Connecticut, are among worst five in terms of public pension shortfall. Are "evil republican" "fiscal conservatives" to blame for NJ and CT pension problems? How about in Illinois, another one in top 5 most underfunded pensions? Conservatives also pulling the strings there?
  - tolidano 5y ago
    One difference is that neither of those two states have New York City, simultaneously the producer and consumer of more money than 1/3 of the country.
cortesoft 5y ago
> and try to save a good 1/3 of your income for the future. But that is what pensions ARE. The people who got them took less money up front because part of their compensation was a defined benefit pension. They WERE saving money by deferring payment. How is this any different than your 401k suddenly saying “sorry, when we said we were investing in the stock market with your money we actually used it on other stuff, so now your retirement account doesn’t have any money”? Would your response be to tell the people who were investing their retirement in the 401k, “well you should have saved money for retirement” They were trying to save money for retirement! They saved money they were making now to be used later. Are you suggesting people should only save by stuffing money in their mattress?
throw0101a 5y ago
> Is it really as political as that as in "the big bad republicans ate my pension"? Which party / ideology is trying to get rid of the public Social Security in the US? * https://en.wikipedia.org/wiki/Social_Security_debate_in_the_United_States https://en.wikipedia.org/wiki/Social_Security_debate_in_the_... Do you think it's a coïncidence that wealth and income inequality in the US as exploded since 1980, the year that Reagan got elected? (Though the Democrats in Congress have been complicit.) The American oligarchs have put on a concerted effort since the 1970s, and they've largely been succeeded. Good history of the subject published in 2020: * https://en.wikipedia.org/wiki/Evil_Geniuses:_The_Unmaking_of_America https://en.wikipedia.org/wiki/Evil_Geniuses:_The_Unmaking_of...

toomuchtodo 5y ago

The US workforce (at the time) was sold on 401ks as a replacement for pensions, when they’re really for only the highest compensation earners as a tax dodge [1]. Predictably, very few made enough to contribute to a 401k in a manner that would replace the safety of pensions, and now large cohorts nearing retirement are left with little while shareholders captured profits that previously contributed towards funding pensions. Tada! [1] https://news.ycombinator.com/item?id=21827154 https://news.ycombinator.com/item?id=21827154

an_opabinia 5y ago
> shareholders captured what previously funded pensions Hmm, but passive retiree investors, on whose behalf all those institutions like Blackrock are ultimately investing, have probably contributed enormously to a rise in asset values. Shareholders gain a lot from people dumbly saving in investment vehicles, whether pensions or 401ks.
- ItsMonkk 5y ago
  Interestingly enough, net flows of those funds are negative[0] as more and more retirees pull to fund their retirement. The only thing keeping the stock market rising at the moment is in all the buybacks keeping demand up and supply down. [0, page 11]: https://www.goldmansachs.com/insights/pages/top-of-mind/buyback-realities/report.pdf https://www.goldmansachs.com/insights/pages/top-of-mind/buyb...
  - missedthecue 5y ago
    The total amount of buybacks in 2020 was less than $500 billion, but almost $35 trillion in shares were traded. How is it mathematically possible that buybacks are the only thing keeping it afloat?
    - deleted 5y ago
      [deleted]
Afforess 5y ago
Agree. 401ks were never intended to be a complete retirement plan or pension replacement, and are frankly untested at the scale that they are now being used for. It's a little scary that a tiny carveout of the larger IRS code for pensions was turned into the defacto retirement plan for Americans. https://en.wikipedia.org/wiki/401(k)#History https://en.wikipedia.org/wiki/401(k)#History
- bradleyjg 5y ago

Spooky23 5y ago

During the 80s, get tough on crime politics mushroomed pensions and healthcare obligations because state/local governments lacked the cash flow for raises during higher inflation times. Police and fire pensions usually drive this stuff because overtime assigned by seniority spikes salaries and pensions. The “evil republican” angle is that “fiscally conservative” politicians usually balanced budgets by cutting pension contributions or buying support by reducing local contributions during tight budget times. Democratic legislators and governors did this too, but this type of fiscal behavior is a “conservative” trademark. States like New York have mostly funded pensions, even with generous pension plans. The “secret” is easy - governments, especially local governments have to pay.

xyzzyz 5y ago
> States like New York have mostly funded pensions, even with generous pension plans. What exactly do you mean by "states like New York" here? What is it New York-like that makes place have funded pensions? For comparison, two of the New York neighbors, which arguably are most similar states to New York, both culturally and politically, that is, New Jersey and Connecticut, are among worst five in terms of public pension shortfall. Are "evil republican" "fiscal conservatives" to blame for NJ and CT pension problems? How about in Illinois, another one in top 5 most underfunded pensions? Conservatives also pulling the strings there?
- tolidano 5y ago
  One difference is that neither of those two states have New York City, simultaneously the producer and consumer of more money than 1/3 of the country.

cortesoft 5y ago

> and try to save a good 1/3 of your income for the future. But that is what pensions ARE. The people who got them took less money up front because part of their compensation was a defined benefit pension. They WERE saving money by deferring payment. How is this any different than your 401k suddenly saying “sorry, when we said we were investing in the stock market with your money we actually used it on other stuff, so now your retirement account doesn’t have any money”? Would your response be to tell the people who were investing their retirement in the 401k, “well you should have saved money for retirement” They were trying to save money for retirement! They saved money they were making now to be used later. Are you suggesting people should only save by stuffing money in their mattress?

throw0101a 5y ago

> Is it really as political as that as in "the big bad republicans ate my pension"? Which party / ideology is trying to get rid of the public Social Security in the US? * https://en.wikipedia.org/wiki/Social_Security_debate_in_the_United_States https://en.wikipedia.org/wiki/Social_Security_debate_in_the_... Do you think it's a coïncidence that wealth and income inequality in the US as exploded since 1980, the year that Reagan got elected? (Though the Democrats in Congress have been complicit.) The American oligarchs have put on a concerted effort since the 1970s, and they've largely been succeeded. Good history of the subject published in 2020: * https://en.wikipedia.org/wiki/Evil_Geniuses:_The_Unmaking_of_America https://en.wikipedia.org/wiki/Evil_Geniuses:_The_Unmaking_of...