/Detroit

[StrangeSox]

A good portion of us will die before we ever reach retirement age.

 

Life expectancy post-infancy is into the 80's these days. Life expectancy at age 65 is another 16 years or so for men and 18 or 19 years for women.

 

[StrangeSox]

Employer match isnt a standard thing, in fact I've only seen it twice my entire career. It's a value-add of working for that company.

 

Only about 50% of employers offer any 401k program at all.

 

FWIW 401k's were originally an executive-level benefit. They weren't created to be the main retirement vehicle for Americans.

[Cknolls]

Why should pension plans project returns that are so far below the rates that have been observed historically?

 

 

You ever read a disclosure on any investment fund: past performance is no guarantee of future return. Unless you are a pension fund run for gov't employees. It is a scam that hides the true cost of pensions. Nothing else.

[Cknolls]

You can still go out and get your own 401k plan, and if its underfunded its because you didnt put enough away to retire. Pensions make zero sense to me, we will pay you because you worked for X amount of years? A wealthy retirement isnt a right.

And we will give you healthcare for life for free and 3% cola every year regardless if CPI is 1%. , 2% or negative. Not our problem how to pay for it. We deserve it.

[Balta1701]

And we will give you healthcare for life for free and 3% cola every year regardless if CPI is 1%. , 2% or negative. Not our problem how to pay for it. We deserve it.

No one needs healthcare. It just makes people lazy.

[Cknolls]

No one needs healthcare. It just makes people lazy.

That's exactly what I said. Why is it retires cannot pay any premiums toward their healthcare?

[Balta1701]

That's exactly what I said. Why is it retires cannot pay any premiums toward their healthcare?

I think retirees should clearly have to pay a reasonable portion of the wages they're earning from the jobs they are working at to cover their healthcare. After their retired. Pay from their current wages/salary. It makes great sense to me.

[Balta1701]

Balta is just outright wrong on his post.

 

What I do think you are missing though, is, as I said... if you start all new hires on a 401k-like plan, how do you pay the people still in the pension system? There is no in-flow to the system, so it all falls apart.

By the way, here's some support for yesterday's "Outright wrong" post.

401(k) plans are bad deal for taxpayers. Dollar for dollar, a traditional pension plan yields more pension benefits than do 401(k) plans because 401(k) management and investment fees are three times higher. And professionals who manage money in pooled pension funds usually get higher returns than workers who manage their own 401(k) accounts. The only clear winners when pensions switch over to the 401(k) plans are brokers and bankers.

 

Here's Pensions substantially outperforming 401k's even before fees:

Traditional pension returns outpaced 401(k) growth in every year between 1995 and 2008, according to a new analysis by Towers Watson. Both types of retirement plans lost value in 2008, but pensions still outperformed 401(k) plans by roughly 1 percentage point, the same percentage of higher returns pensions have averaged over the past decade.

And continuing through 2011:

Fees also figure into the most recent results – and, indeed, play into the long-term losing streak of 401(k) investors. In 2011, 48% of assets in 401(k) and other DC plans were held in mutual funds, compared with only 14% of pension assets; Towers Watson estimates those fees shaved about 0.31% off of DC plans’ returns, making the difference between a gain and a loss for the year. (Pension funds face investment expenses, too, of course, but their enormity often means they pay much less.)

 

How much do all these cumulative performance differences matter? Towers Watson estimates that if a pension plan and a DC plan had each started out with the same amount of assets in 1995, and then earned the average returns for their category each year, the pension plan would have had 13% more money than the DC plan at the end of 2011.

[southsider2k5]

By the way, here's some support for yesterday's "Outright wrong" post.

 

 

Here's Pensions substantially outperforming 401k's even before fees:

 

And continuing through 2011:

 

Out of curiosity, are pension funds that blow up or get bailed out factored into the returns?

 

[Balta1701]

Out of curiosity, are pension funds that blow up or get bailed out factored into the returns?

That would make them an even better deal if you consider there's a chance that does happen.

 

Pension funds have a bunch of advantages over the average 401k. Built in economies of scale combined with professional management combined with a long-term outlook. Some of those can be eliminated by an active, intelligently managed 401k plan, but there's nothing I can do that makes my paperwork as simple as a pension plan.

[southsider2k5]

That would make them an even better deal if you consider there's a chance that does happen.

 

Pension funds have a bunch of advantages over the average 401k. Built in economies of scale combined with professional management combined with a long-term outlook. Some of those can be eliminated by an active, intelligently managed 401k plan, but there's nothing I can do that makes my paperwork as simple as a pension plan.

 

My point is I am betting that they don't which means the returns are skewed badly. I'd bet they are only including active and liquid pensions.

[Balta1701]

My point is I am betting that they don't which means the returns are skewed badly. I'd bet they are only including active and liquid pensions.

They survey them by size internationally and nationally and break out the 300 largest for additional scrutiny.

[southsider2k5]

They survey them by size internationally and nationally and break out the 300 largest for additional scrutiny.

 

That's what I thought. So no reflection of failed or rescued pensions and the additional money's put into them.

[RockRaines]

That would make them an even better deal if you consider there's a chance that does happen.

 

Pension funds have a bunch of advantages over the average 401k. Built in economies of scale combined with professional management combined with a long-term outlook. Some of those can be eliminated by an active, intelligently managed 401k plan, but there's nothing I can do that makes my paperwork as simple as a pension plan.

Of course pensions have HUGE advantages, you make more money than you put in.

[StrangeSox]

Of course pensions have HUGE advantages, you make more money than you put in.

It's essentially deferred pay. You are paid less now on the promise of compensation in retirement.

[Balta1701]

Of course pensions have HUGE advantages, you make more money than you put in.

That's supposed to be the point of the 401K also.

[RockRaines]

That's supposed to be the point of the 401K also.

If it was economy-independent.

[StrangeSox]

Judge proposes August 19th deadline for motions against Detroit's bankruptcy filing

[Balta1701]

If it was economy-independent.

So the 401k is supposed to make economic crashes even worse? That actually sounds...correct.

[Jenksismyhero]

That's supposed to be the point of the 401K also.

 

I don't think anyone has the expectation of making 3/4 of their pay at retirement for LIFE out of their 401k plan.

[EvilMonkey]

I don't think anyone has the expectation of making 3/4 of their pay at retirement for LIFE out of their 401k plan.

Or more if you double and triple dip as many politicians do. Just look at Eeeeeemile Jones, poster child for working the system.

[RockRaines]

So the 401k is supposed to make economic crashes even worse? That actually sounds...correct.

No the payback is economy-based. For example my father retired with half of what he was supposed to because he retired in 08.

[StrangeSox]

Your father's reduced fixed income feeds into the cyclical downturn of the economy as a whole, driven by a huge drop in consumer demand.

[Balta1701]

No the payback is economy-based. For example my father retired with half of what he was supposed to because he retired in 08.

Having this happen is a terrible thing for the country.

[southsider2k5]

Having this happen is a terrible thing for the country.

 

But basing people's retirement solely on something that requires both more and more people paying into the fund to keep it solvent over time, and for the organization to be still profitable and in existence at your retirement is a great thing for the country...