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Hahahahahhaa! So you think your defined-benefit pension is proof against losses, eh? Well, it can protect you from a lot, that's for sure. But as a rule, pensi

Hahahahahhaa! So you think your defined-benefit pension is proof against losses, eh? Well, it can protect you from a lot, that's for sure. But as a rule, pension costs have been rising for decades, and were underfunded even before the economy and tax revenues tanked. In this narrow column I can only highlight a few small pieces of hilarity, like pension plans borrowing cash to invest in real estate to the tune of a $1B loss (Calpers - http://online.wsj.com/news/articles/SB122947172015212225 http://online.wsj.com/news/articles/SB122947172015212225 - use a Google HTTP referer to read the full article). Or the plan where you borrow from your pension plan TO PAY FOR YOUR PENSION PLAN -- http://www.nytimes.com/2012/02/28/nyregion/to-pay-new-york-pension-fund-cities-borrow-from-it-first.html?_r=1&adxnnl=1&emc=eta1&pagewanted=print&adxnnlx=1391138226-e8u9VBaQ8WHHfVdFXfzUgA http://www.nytimes.com/2012/02/28/nyregion/to-pay-new-york-p... So yeah, you've got a lot of clout, but you'd better hope that your city, state, or other relevant agency stays afloat or you're at risk of getting dinged a lot like an ordinary hard-working unentitled American. (At least with a 401(k) or IRA, you know what assets you have and actually own them yourself -- moreover, if you worked somewhere small enough, they might be more diversified than your municipality's future tax revenue.)

wheaties 13y ago
The best part is about real estate. Ask my grandma and it's great! Ask people my age and they've lost their entire fortunes, declared bankruptcy and some are still on payment plans for real estate worth 1/2 they paid for it. Pensions, real estate, and even the stock market is not guaranteed. The best advise is to stay diversified and don't rely on one thing unless you founded it and can keep it relevant.
- fixedd 13y ago
  The best part about the property-vs-other investments is that if you look at it without the bubbles (read: still not NOW) then property values (as a whole) in North America rise almost lock-step with inflation. Even the simplest of index funds FAR outperforms.
refurb 13y ago
I was going to say the same thing. Those defined-benefit pension plans sure worked out for the municipal workers in Detroit!
a8da6b0c91d 13y ago
> with a 401(k) or IRA, you [...] actually own them yourself It seems to me you don't quite own assets in a 401k. You cede some rights to Uncle Sam. I feel there's enough political risk to socking money away in such accounts to be wary. In the event of a fiscal crisis they're juicy targets.
- LVB 13y ago
  What rights am I ceding?
  - fixedd 13y ago
    Not arguing for the OP, but you're waging that taxes in the future won't be hugely different than they are now.
    - a8da6b0c91d 13y ago
      You essentially have to ask the government for permission to do anything with funds in a 401k/IRA. It's not a normal holding. It's already an impractical pain to make various kinds of investments with such funds; the accounts are pretty much all set up for US traded equities and nothing else. But the real kicker is you don't even have some sort of lifetime guarantee on the restrictions. I could easily see them making it altogether illegal to hold foreign assets, for example. The worst case scenario is some Cyprus style haircut.
aroberge 13y ago
The article is written by a Canadian in a Canadian newspaper. The situation in Canada is quite different from the one in the States. Defined benefit pension plans for public civil servants (including teachers) are quite safe in Canada.
- dnautics 13y ago
  translation: this time it's different
  - BrandonMarc 13y ago
    I'm amazed at how prophetic that book [0] is. I wish it would be required reading for every Congresscritter, SCOTUS judge, every member of every federal agency, and all the other cogs in the executive branch ... but I fear they would simply see all the proven mistakes as a blueprint of what to do, only "smarter" this time. ---------------------------------------- [0] http://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640 http://www.amazon.com/This-Time-Different-Centuries-Financia... This Time Is Different: Eight Centuries of Financial Folly It basically takes centuries of data and shows how world leaders tend to make the same mistakes, causing crises, and then follow the wrong solutions to said crises. More: http://www.reinhartandrogoff.com/ http://www.reinhartandrogoff.com/
- GBond 13y ago
  so #1 tip should really be: move to Canada
  - fennecfoxen 13y ago
    Too cold.

wheaties 13y ago

The best part is about real estate. Ask my grandma and it's great! Ask people my age and they've lost their entire fortunes, declared bankruptcy and some are still on payment plans for real estate worth 1/2 they paid for it. Pensions, real estate, and even the stock market is not guaranteed. The best advise is to stay diversified and don't rely on one thing unless you founded it and can keep it relevant.

fixedd 13y ago
The best part about the property-vs-other investments is that if you look at it without the bubbles (read: still not NOW) then property values (as a whole) in North America rise almost lock-step with inflation. Even the simplest of index funds FAR outperforms.

refurb 13y ago

I was going to say the same thing. Those defined-benefit pension plans sure worked out for the municipal workers in Detroit!

a8da6b0c91d 13y ago

> with a 401(k) or IRA, you [...] actually own them yourself It seems to me you don't quite own assets in a 401k. You cede some rights to Uncle Sam. I feel there's enough political risk to socking money away in such accounts to be wary. In the event of a fiscal crisis they're juicy targets.

LVB 13y ago
What rights am I ceding?
- fixedd 13y ago
  Not arguing for the OP, but you're waging that taxes in the future won't be hugely different than they are now.
  - a8da6b0c91d 13y ago
    You essentially have to ask the government for permission to do anything with funds in a 401k/IRA. It's not a normal holding. It's already an impractical pain to make various kinds of investments with such funds; the accounts are pretty much all set up for US traded equities and nothing else. But the real kicker is you don't even have some sort of lifetime guarantee on the restrictions. I could easily see them making it altogether illegal to hold foreign assets, for example. The worst case scenario is some Cyprus style haircut.

aroberge 13y ago

The article is written by a Canadian in a Canadian newspaper. The situation in Canada is quite different from the one in the States. Defined benefit pension plans for public civil servants (including teachers) are quite safe in Canada.

dnautics 13y ago
translation: this time it's different
- BrandonMarc 13y ago
  I'm amazed at how prophetic that book [0] is. I wish it would be required reading for every Congresscritter, SCOTUS judge, every member of every federal agency, and all the other cogs in the executive branch ... but I fear they would simply see all the proven mistakes as a blueprint of what to do, only "smarter" this time. ---------------------------------------- [0] http://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640 http://www.amazon.com/This-Time-Different-Centuries-Financia... This Time Is Different: Eight Centuries of Financial Folly It basically takes centuries of data and shows how world leaders tend to make the same mistakes, causing crises, and then follow the wrong solutions to said crises. More: http://www.reinhartandrogoff.com/ http://www.reinhartandrogoff.com/
GBond 13y ago
so #1 tip should really be: move to Canada
- fennecfoxen 13y ago
  Too cold.