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> Every single pension system has the working population pay for the retirees. Where do you think the money comes from? Disagree. Counter-examples: 401k in t

> Every single pension system has the working population pay for the retirees. Where do you think the money comes from? Disagree. Counter-examples: 401k in the US Second pillar in Switzerland. The money comes from the people saving and investing their own money for their old age. Shocker, I know.

justeleblanc 4y ago
You utterly missed my point. You say people invest money. Aren't they expecting a return? Where does that return come from? If there is no return on investment, are we really talking about a pension, or just saving up for late age unemployment?
lazyasciiart 4y ago
Those are not pensions. The 401k system is explicitly an alternative to the older pension systems. Words mean things.
- jbn 4y ago
  but these are pensions, more specifically they are supplemental pensions on top of the basic one like US social security, or France's basic pension from SS (which is supplemented by "complementary pension" from other regimes like AGIRC/ARRCO).
cdavid 4y ago
it is a common misconception that how the retirement is funded makes a huge difference in how much you need to save. In most situations, it does not matter nearly as much as people believe. Dependency ratio will determine in large part how much people will need to save to get a given level of retirement income. For example, your 401k ability to pay for your retirement will depend on productivity gains , growth, saving, investments happen in the future. Those will look very different if you have 4 working age people for one non working person, vs 2 working age people for one non working one. In the extreme case, if nobody is working anymore when you retire, your 401k will likely worth almost nothing. The problem in France is not how it s funded, but the fact that retirement incomes are way above the funding level. France, with Italy, are the only two OECD countries where retirees have a higher income that working people, which is insane. However, since retirees vote much more than other demographics, their too large income will not be touched.
- amadvance 4y ago
  In Italy, the retirement age was raised to 67 in 2011. However, in some cases, it is still possible to retire earlier, but the amount you receive will be proportionally adjusted based on your remaining life expectancy. This change in retirement age only partially applies to those who started working before 1995. Therefore, it is still in a transition phase, and it will take some time before it takes full effect.
mahkeiro 4y ago
Ok but indirectly it's still the same. Once you reach the retirement age, interest/dividend and capital increase are "paid" by younger generation. If at retirement age you were to have no interest/dividend/capital increase you are going to have a very small pension, especially if inflation kick-in.

justeleblanc 4y ago

You utterly missed my point. You say people invest money. Aren't they expecting a return? Where does that return come from? If there is no return on investment, are we really talking about a pension, or just saving up for late age unemployment?

lazyasciiart 4y ago

Those are not pensions. The 401k system is explicitly an alternative to the older pension systems. Words mean things.

jbn 4y ago
but these are pensions, more specifically they are supplemental pensions on top of the basic one like US social security, or France's basic pension from SS (which is supplemented by "complementary pension" from other regimes like AGIRC/ARRCO).

cdavid 4y ago

it is a common misconception that how the retirement is funded makes a huge difference in how much you need to save. In most situations, it does not matter nearly as much as people believe. Dependency ratio will determine in large part how much people will need to save to get a given level of retirement income. For example, your 401k ability to pay for your retirement will depend on productivity gains , growth, saving, investments happen in the future. Those will look very different if you have 4 working age people for one non working person, vs 2 working age people for one non working one. In the extreme case, if nobody is working anymore when you retire, your 401k will likely worth almost nothing. The problem in France is not how it s funded, but the fact that retirement incomes are way above the funding level. France, with Italy, are the only two OECD countries where retirees have a higher income that working people, which is insane. However, since retirees vote much more than other demographics, their too large income will not be touched.

amadvance 4y ago
In Italy, the retirement age was raised to 67 in 2011. However, in some cases, it is still possible to retire earlier, but the amount you receive will be proportionally adjusted based on your remaining life expectancy. This change in retirement age only partially applies to those who started working before 1995. Therefore, it is still in a transition phase, and it will take some time before it takes full effect.

mahkeiro 4y ago

Ok but indirectly it's still the same. Once you reach the retirement age, interest/dividend and capital increase are "paid" by younger generation. If at retirement age you were to have no interest/dividend/capital increase you are going to have a very small pension, especially if inflation kick-in.