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There were a lot of negatives about pensions; employee mobility and companies trying everything possible to weasel out of promised benefits being the biggest on

There were a lot of negatives about pensions; employee mobility and companies trying everything possible to weasel out of promised benefits being the biggest ones. The problem isn't retirement accounts, it's a lack of mandatory funding by employers.

GenerocUsername 4y ago
Agreed. I cannot imagine relying on a company to pay me during retirement. I get that that system existed once, but the incentives are so misaligned it terrifies me
darth_avocado 4y ago
A simple solution would be mandatory 401k contributions by employers for all workers. Even a 2500/year contribution for a worker will yield almost 200k at a 2% annual return on an average and almost 500k at a 5% return over 45 years. While by no means could independently support a lifestyle, it can definitely supplement social security. The burden for workers to save would be significantly lower.
- toomuchtodo 4y ago
  Australia’s Superannuation concept is a reasonable model imho. Not only must employer contributions be mandated, but it must be very hard to get access to the funds before retirement. Otherwise, they’re just cashed out. You also have to have strong guardrails around fees and fiduciaries so it’s not a big pot of money for finance to leach off of. https://en.wikipedia.org/wiki/Superannuation_in_Australia https://en.wikipedia.org/wiki/Superannuation_in_Australia Also agree with Retric’s sibling comment.
- Retric 4y ago
  At that scale there’s no reason to use 401k style personal investments that’s just pointless overhead and risk. Social Security tracks individual contributions and that’s all that is needed. Just pool everyone’s investment and pool everyone into a single safe asset allocation. We don’t use that system because individual 401k’s are extremely profitable for the companies running them. Fees can reduce the long term payout by as much as 1/3.
  - klipklop 4y ago
    Yeah the worst part is they don't have to clearly/obviously disclose how much they are taking out in fees. It just vanishes from your account unless you actually look into it. 401k's funds sometimes have fees that are multiples of Vanguard....and perform worse. Best to go into a self directed account and use Vanguard and safe yourself thousands in fees over a lifetime.
cykros 4y ago
I don't know about mandatory, as 401(k)'s aren't mandatory in the first place. But incentivization using tax code would be sensible. You're absolutely right about pensions though; people pining for the days of the fixed benefit pension rarely are all that familiar with the pension plans that simply went bust due to inability to fund their liabilities due to market conditions. At least with a 401(k), you're not running out of money because your retirement is being invested too conservatively so as to pay someone older than you, leaving it empty by the time it's your turn.

GenerocUsername 4y ago

Agreed. I cannot imagine relying on a company to pay me during retirement. I get that that system existed once, but the incentives are so misaligned it terrifies me

darth_avocado 4y ago

A simple solution would be mandatory 401k contributions by employers for all workers. Even a 2500/year contribution for a worker will yield almost 200k at a 2% annual return on an average and almost 500k at a 5% return over 45 years. While by no means could independently support a lifestyle, it can definitely supplement social security. The burden for workers to save would be significantly lower.

toomuchtodo 4y ago
Australia’s Superannuation concept is a reasonable model imho. Not only must employer contributions be mandated, but it must be very hard to get access to the funds before retirement. Otherwise, they’re just cashed out. You also have to have strong guardrails around fees and fiduciaries so it’s not a big pot of money for finance to leach off of. https://en.wikipedia.org/wiki/Superannuation_in_Australia https://en.wikipedia.org/wiki/Superannuation_in_Australia Also agree with Retric’s sibling comment.
Retric 4y ago
At that scale there’s no reason to use 401k style personal investments that’s just pointless overhead and risk. Social Security tracks individual contributions and that’s all that is needed. Just pool everyone’s investment and pool everyone into a single safe asset allocation. We don’t use that system because individual 401k’s are extremely profitable for the companies running them. Fees can reduce the long term payout by as much as 1/3.
- klipklop 4y ago
  Yeah the worst part is they don't have to clearly/obviously disclose how much they are taking out in fees. It just vanishes from your account unless you actually look into it. 401k's funds sometimes have fees that are multiples of Vanguard....and perform worse. Best to go into a self directed account and use Vanguard and safe yourself thousands in fees over a lifetime.

cykros 4y ago

I don't know about mandatory, as 401(k)'s aren't mandatory in the first place. But incentivization using tax code would be sensible. You're absolutely right about pensions though; people pining for the days of the fixed benefit pension rarely are all that familiar with the pension plans that simply went bust due to inability to fund their liabilities due to market conditions. At least with a 401(k), you're not running out of money because your retirement is being invested too conservatively so as to pay someone older than you, leaving it empty by the time it's your turn.