4 ms·

You Shouldn't Pay into a Pension

2 points by SpaghettiX 4y ago

cybrexalpha 4y ago
This ignores that most employers will do a pension match. So yeah you pay in X% of your salary, but so does your employer. That's X% more money that you're getting — for free.
- jstx1 4y ago
  It also ignores that you can take out a portion of your pension tax free, and that your marginal tax rate is likely to be lower in retirement. It also ignores the amount of flexibility and options that you have in terms of picking your provider and your investments. A bunch of things in the article are outright wrong, others are misleading - it's a bad look for the author to criticise things they understand so poorly.
  - SpaghettiX 4y ago
    Hi, thanks for reading it. I'm the author. I'm sure others might understand the pension world more than me - I wanted to share my perspective. I was offered a pension match in th past, some were good (e.g. up to 7% match). I didn't include the "positives" of having a pensions, because that's common knowledge about pensions. I might improve this article based on your concerns. Yes, is free "pension-money", but until you take it out, it means nothing. Some of the disadvantages in my article are more certain to actually happen. All of the disadvantages I noted need to be resolved before you get your extra 7%-matched pension money. Is the risk worth it? For me: no, pensions are not worth the risk.
- h2odragon 4y ago
  Assuming you ever manage to get it back out. I've met more people working after retirement than not, very few of those felt they could do without the job. My employer assured me for years that I was paying taxes, Social Security, and pension savings. Turned out not to be the case. I spent my health on that job and found out that I'm not eligible for any assistance because I never paid in. The difference between me and most folks is I already know how boned I am, it isn't a looming surprise.
jleyank 4y ago
This seems to be the argument for “defined benefit” (pension) vs “defined contribution” (401k) to use the us as an example. In the latter case, it’s cash under the workers control and it’s usually wise to contribute enough to pick up the full match. Countries have various mechanisms to save for retirement and it’s wise to do so, while keeping an eye on how taxes will be deferred or avoided with each mechanism. This avoids trusting the employer.
- deleted 4y ago
  [deleted]
- jstx1 4y ago
  Don't get confused by the word pension - the defined contribution version (closest equivalent of a 401k) is still called a pension in the UK.
  - jleyank 4y ago
    I guess it’s where the money is and how it’s controlled. Here in Canada, we have a tax free and tax deferred mechanism and both are owned by the individual. Pension, as far as I can tell, is used as in the us - it’s a defined benefit mechanism. Having worked in tech, such things are unfamiliar to me. There are also work based, and residence based government pensions/benefits separate from whatever comes from some aspect of government or corporate employment.
    - jstx1 4y ago
      > Pension, as far as I can tell, is used as in the us - it’s a defined benefit mechanism My point was to draw a distinction between this and the UK (where the author of the post is). In the UK there's - state pension (similar to social security in the US) (not the topic of this thread) - defined benefit pensions - increasingly rare because they're expensive for the employer (some older companies and the National Health Service still have this type) - defined contribution pensions - similar to a US 401k - you contribute some % of your salary, your employer does too, you can decide what to invest in or transfer to a different provider when you move jobs - this is still called a pension in the UK, it's the most common type of pension and it's the topic of the original post

2 points by SpaghettiX 4y ago

This ignores that most employers will do a pension match. So yeah you pay in X% of your salary, but so does your employer. That's X% more money that you're getting — for free.

jstx1 4y ago
It also ignores that you can take out a portion of your pension tax free, and that your marginal tax rate is likely to be lower in retirement. It also ignores the amount of flexibility and options that you have in terms of picking your provider and your investments. A bunch of things in the article are outright wrong, others are misleading - it's a bad look for the author to criticise things they understand so poorly.
- SpaghettiX 4y ago
  Hi, thanks for reading it. I'm the author. I'm sure others might understand the pension world more than me - I wanted to share my perspective. I was offered a pension match in th past, some were good (e.g. up to 7% match). I didn't include the "positives" of having a pensions, because that's common knowledge about pensions. I might improve this article based on your concerns. Yes, is free "pension-money", but until you take it out, it means nothing. Some of the disadvantages in my article are more certain to actually happen. All of the disadvantages I noted need to be resolved before you get your extra 7%-matched pension money. Is the risk worth it? For me: no, pensions are not worth the risk.
h2odragon 4y ago
Assuming you ever manage to get it back out. I've met more people working after retirement than not, very few of those felt they could do without the job. My employer assured me for years that I was paying taxes, Social Security, and pension savings. Turned out not to be the case. I spent my health on that job and found out that I'm not eligible for any assistance because I never paid in. The difference between me and most folks is I already know how boned I am, it isn't a looming surprise.

jleyank 4y ago

This seems to be the argument for “defined benefit” (pension) vs “defined contribution” (401k) to use the us as an example. In the latter case, it’s cash under the workers control and it’s usually wise to contribute enough to pick up the full match. Countries have various mechanisms to save for retirement and it’s wise to do so, while keeping an eye on how taxes will be deferred or avoided with each mechanism. This avoids trusting the employer.

deleted 4y ago
[deleted]
jstx1 4y ago
Don't get confused by the word pension - the defined contribution version (closest equivalent of a 401k) is still called a pension in the UK.
- jleyank 4y ago
  I guess it’s where the money is and how it’s controlled. Here in Canada, we have a tax free and tax deferred mechanism and both are owned by the individual. Pension, as far as I can tell, is used as in the us - it’s a defined benefit mechanism. Having worked in tech, such things are unfamiliar to me. There are also work based, and residence based government pensions/benefits separate from whatever comes from some aspect of government or corporate employment.
  - jstx1 4y ago
    > Pension, as far as I can tell, is used as in the us - it’s a defined benefit mechanism My point was to draw a distinction between this and the UK (where the author of the post is). In the UK there's - state pension (similar to social security in the US) (not the topic of this thread) - defined benefit pensions - increasingly rare because they're expensive for the employer (some older companies and the National Health Service still have this type) - defined contribution pensions - similar to a US 401k - you contribute some % of your salary, your employer does too, you can decide what to invest in or transfer to a different provider when you move jobs - this is still called a pension in the UK, it's the most common type of pension and it's the topic of the original post