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> Why isn’t the model just to pay employees more and let them save to a 401k that they control? If you really want to understand this, it's probably worth your

> Why isn’t the model just to pay employees more and let them save to a 401k that they control? If you really want to understand this, it's probably worth your while to check out the Frontline piece The Retirement Gamble[0] But a few key takeaways: 1) the 401k was never designed to be a general purpose retirement plan, 2) you would expect professional fund managers to be better at maximizing returns compared to a trucker selecting their own individual funds..., 3) if they even voluntarily invest in it in the first place. The purpose of the pension is that a pool of employees collectively invest a portion of their income by hiring professional investment managers that ostensibly know what they are doing and can stay abreast of the market. They design short and long term investment strategies to meet the defined obligations of those pension contracts. The 401k is not the same thing; we are placing the onus on the individual to research funds, understand the market, re-balance their portfolio. And in the event of a recession, the individual might be SOL if they are dependent on that portfolio. Next time you're at a rest stop, take a sampling and see how financially literate they are and how much they know even about mutual fund selection. [0] https://www.pbs.org/wgbh/frontline/documentary/retirement-gamble/transcript/ https://www.pbs.org/wgbh/frontline/documentary/retirement-ga..., https://www.pbs.org/wgbh/frontline/documentary/retirement-gamble/ https://www.pbs.org/wgbh/frontline/documentary/retirement-ga...

snarf21 2y ago
Fair enough, but we also know that an index fund beats "professional investment managers" over any reasonable time horizon. Warren Buffet bet a million dollars that this is true and won. The big problems with a pension is the rent seeking by all the brokers and "professionals" just for the employee to earn less than the index and if there is a recession, you need more new employees to prop up and bail the pension out (pyramid scheme). Why not just have something like SIMPLE+ and you get a matching percentage that has to be a major index and you can't move it out until retirement when you can roll to your own devices and whims. The employees and their families would see a net benefit of such a mechanism.
- ghaff 2y ago
  Companies do restrict 401(k) options. Of course you could restrict even further but a lot of employees complain (loudly) that they don't have a broader array of investment options.
- CharlieDigital 2y ago
  > Fair enough, but we also know that an index fund beats "professional investment managers" over any reasonable time horizon. OK, now couple that with a mandatory contribution + defined benefit calculated by actuaries and you've got a pension except now everyone knows exactly what they're going to retire with and can plan accordingly and, BONUS, they can still contribute into self-managed retirement accounts if they wish to. Pensions provide socioeconomic stability and predictability in a way that a 401k never can.
ghaff 2y ago
#3 is the big one. Given no real forcing function a lot of people with bills to pay just leave things for another day. #1. 401ks weren't really designed. They fell out of some tax law changes. #2. (Given #3.) Really isn't a big deal. You don't need to maximize returns. You can come up with a reasonable fire and (mostly) forget investment strategy without being a financial genius. I keep my eye on some of my portfolio but mostly leave it alone. It seems to infantilize working class people to assume they can't make the most rudimentary investment decisions on their own. Maybe we shouldn't let them buy houses either.

snarf21 2y ago

Fair enough, but we also know that an index fund beats "professional investment managers" over any reasonable time horizon. Warren Buffet bet a million dollars that this is true and won. The big problems with a pension is the rent seeking by all the brokers and "professionals" just for the employee to earn less than the index and if there is a recession, you need more new employees to prop up and bail the pension out (pyramid scheme). Why not just have something like SIMPLE+ and you get a matching percentage that has to be a major index and you can't move it out until retirement when you can roll to your own devices and whims. The employees and their families would see a net benefit of such a mechanism.

ghaff 2y ago
Companies do restrict 401(k) options. Of course you could restrict even further but a lot of employees complain (loudly) that they don't have a broader array of investment options.
CharlieDigital 2y ago
> Fair enough, but we also know that an index fund beats "professional investment managers" over any reasonable time horizon. OK, now couple that with a mandatory contribution + defined benefit calculated by actuaries and you've got a pension except now everyone knows exactly what they're going to retire with and can plan accordingly and, BONUS, they can still contribute into self-managed retirement accounts if they wish to. Pensions provide socioeconomic stability and predictability in a way that a 401k never can.

ghaff 2y ago

#3 is the big one. Given no real forcing function a lot of people with bills to pay just leave things for another day. #1. 401ks weren't really designed. They fell out of some tax law changes. #2. (Given #3.) Really isn't a big deal. You don't need to maximize returns. You can come up with a reasonable fire and (mostly) forget investment strategy without being a financial genius. I keep my eye on some of my portfolio but mostly leave it alone. It seems to infantilize working class people to assume they can't make the most rudimentary investment decisions on their own. Maybe we shouldn't let them buy houses either.