5 ms·

Pensions are a foolish idea and I seriously hope no one under the age of 50 takes a job with a pension, expecting it to actually materialize. But the workers of

• mathattack 13y ago
  Once could argue the same thing about Social Security. :-) In my view, there are 2 kinds of pensions. One is Defined Benefit, which is crazy to count on. On the other hand, companies can offer Defined Contribution, which is fine. If a company offers a 401K, and makes a 10K contribution, I'm happy. It's 10K more income that will probably get taxed at a lower bracket when I retire.
  • _delirium 13y ago
    Defined contribution is kind of a poor match to future needs on the recipient's side, though, since people do not live fixed and predictable periods of time. You could fix this individually by converting the lump sum to an annuity, but few people seem to do so (it doesn't help that the annuity market is a bit confusing). The end result is that people who live significantly longer than expected run out of money. And they do so at the least convenient time: many people early in retirement could probably go back to work if needed, but a typical 100-year-old, who retired 30+ years ago and now ran out of money, is not in a condition to reenter the workforce. In most countries the backstop is to have a small defined-benefit state pension, so they won't end up literally penniless (in the U.S. this is Social Security, which pays a minimum of ~$9,500/yr). Other countries have tried to move more people into essentially buying annuities to mitigate the varying-lifespan risk. For example most defined-contribution private-sector pensions in Denmark now pay into pension funds (third-party, non-profit organizations) that by default are essentially the purchase of an annuity. You can cash it out as a lump sum upon retirement, but if you do nothing, the default is a traditional monthly pension for life, with the amount dependent on your contribution.
    • mathattack 13y ago
      The problem with defined benefit is there are always unknown risks. You can say that the government, or an insurance company will pick up the tab, but what if they fail? If the amount of the benefit is large enough (retirement savings for a generation) it's impossible to guarantee. Small #s yes, large, no. Many intelligent people don't believe a small system like Social Security will hold.
      • deleted 13y ago
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  • bradleyjg 13y ago
    Defined contribution can be transformed into defined benefit if the contribution is a deferred annuity. The reason pension obligations can be discharged in bankruptcy and 401k contributions can't+, is because the former is a contractual obligation to a future stream of payments, while the latter is a transfer of vested property. Neither employers nor unions like this idea however because they both like to use pensions as a slush fund. Some workers also might not like it because annuities don't have great returns. +There is the unlikely possibility of a clawback of 2 years at most.
• gnaritas 13y ago
  > Let us manage our own retirements. We already know from pre-social security times that approach doesn't work; most people end up destitute.
  • drcube 13y ago
    I'm not talking about social security, I'm talking about pensions. To which a 401k or IRA is infinitely preferable. But SS has the same problem as pensions: there's nothing to stop future politicians from eliminating it at any time to free up some headroom in the budget. Perhaps a mandatory 401k everyone must have, contribute to and refrain from using until age 65 would be the best of both worlds?
    • coldtea 13y ago
      >But SS has the same problem as pensions: there's nothing to stop future politicians from eliminating it at any time to free up some headroom in the budget. The same goes for salaries. There's nothing to stop them from offering them and enforcing slavery. Except, you know, the people that would be affected.
      • drcube 13y ago
        No, if they stop paying your salary, you can stop working for them. If you work your entire career, you don't really have a recourse if they then refuse to pay the pension you were promised. You can't go back in time and choose another career.
        • dragonwriter 13y ago
          > If you work your entire career, you don't really have a recourse if they then refuse to pay the pension you were promised. Society needs to find some way to make promises of future money in exchange for present goods and services enforceable. If only there was some mechanism for that...
    • rpedela 13y ago
• jgreen10 13y ago
  It's easy for me to say, since I'm from a country with an excellent pension system (the Netherlands), but completely managing your own pension would be foolish at best. You cannot predict how long you will live compared to others. To spread the risk, you should always be part of a bigger pension scheme.
  • aquark 13y ago
    That is an interesting point. You can of course always buy an annuity to benefit from the risk spreading whilst retaining control over your pension funds up to that point. Are there products that let you do this pre-retirement as opposed to at retirement? If so they certainly don't seem as popular as the traditional save-to-65-then-buy-one approach.
    • deleted 13y ago
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• coldtea 13y ago
  >But seriously, guys, don't offer your employees a pension, and if a potential employer offers you one, laugh in their face. Let us manage our own retirements. Yes, let's see how that turns out, when 80% of the population over 65 is destitute or working at Walmart/McDonalds well into its seventies...
  • Shivetya 13y ago
    I am always shocked by the number of professionals I work with who either do not fund their 401k, or only to matching, instead of going for max. Yes I understand hitting your maximum can be difficult, but it should come before frivolous expenditures. You are investing in yourself and if you have family, them. Yet while the excuses are legion the majority of these same people have no issue with car notes(s), cell phone contract(s), and buying breakfast/daily. Fortunately my company offered a pension when I joined, they have since converted to 401k and frozen pensions at the end of the year. Yet it is there and one more safety for me.
    • bradleyjg 13y ago
      Depending on your alternative tax advantaged investment options, you may not want to max your 401k contribution. For various tawdry reasons most 401k plans have terrible investment options. You certainly want to take the free money (i.e. up to match) but if you have alternative tax advantaged options (e.g. IRA, HSA) with better fund options you may want to max those first before the 401k.
    • dmm 13y ago
      What kind of politicians and policies will of these retired, former professionals vote for? Maybe it will be something like "Tax the idiots stupid enough to save and give it to the newly poor".
      • mynewwork 13y ago
        This is a serious concern of mine. There already exist countries in Europe which tax savings. It wouldn't shock me if after 40 years of living below my means and saving diligently, that an act of congress makes my IRA/401k be taxed at a higher rate to give money to my non-saving contemporaries. I'm sure there are some on the far-left that could rationalize redistributing savings accounts.
• nilkn 13y ago
  In the oil & gas industry, it's common for companies to offer both 401(k) plans with matching and traditional pension plans.