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> Can you? A defined benefit plan is ultimately involving someone taking a risk. Yup. No less than Warren Buffett, who spent literally his entire career perfo
by WkndTriathlete 3y ago
> Can you? A defined benefit plan is ultimately involving someone taking a risk.
Yup. No less than Warren Buffett, who spent literally his entire career performing risk analyses, could figure out a way to manage defined benefit plan risk, and stated as such in a (now famous) memo in the late 60s or early 70s.
Couple that with the number of pension defaults and pension haircuts that have occurred and are likely to continue to occur and 401(k) plans look a lot more attractive, both to the employer and to the employee.
- eigenvalue 3y agoThe memo in question: https://davidcoveney.com/wp-content/uploads/2019/12/160301289-Warren-Buffett-Katharine-Graham-Letter.pdf https://davidcoveney.com/wp-content/uploads/2019/12/16030128... It helps a LOT if you also have an investing genius giving you tips on how to allocate the plan assets!
- nradov 3y agoIn theory it's possible to make defined benefit pension programs work. In practice they almost always eventually fall apart. The risk is large as to make them essentially financial malpractice. Defined contribution plans such as 401(k) are much safer for workers and taxpayers.