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A preview of the U.S. without pensions

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Re: A preview of the U.S. without pensions

#11

Post by newfoundglory »

friedButter wrote: post #7

Is retirement planning (Live "below your means" and put in 20-30% or more of your salary towards long term investments), and family support (you fund your kids education and parents post retirement needs, and your kids fund your post retirement needs and your grandkids education) such an alien concept for Americans? When you manage it internally, instead of paying interest to a bank, you just have lost opportunity co…

Welcome to the internet! Good guess - that style of extended family reliance is quite alien to many Americans, often discussed under the topic "collectivism v individualism" or a similar name. That aside, there are many other differences in financial expectations and abilities in the two cultures, so a simple comparison of salary amounts isn't a good way to tell if Americans "should be able" to do something that happens in other countries.

Re: A preview of the U.S. without pensions

#12

Post by ajmurmann »

friedButter wrote: post #7

Is retirement planning (Live "below your means" and put in 20-30% or more of your salary towards long term investments), and family support (you fund your kids education and parents post retirement needs, and your kids fund your post retirement needs and your grandkids education) such an alien concept for Americans? When you manage it internally, instead of paying interest to a bank, you just have lost opportunity co…

There is lots of Americans who barely get by. I recommend taking a look at "Nickeled and Dimed" by Barbara Ehrenreich. So many people simply cannot afford to put that much money aside. To the point of family support: Many Americans move across state lines a few times during their lifetime. That very much weakens family bonds. On top of that it's much harder to take care of your parents alone while your siblings live in different states. It in fact also makes having children harder.

Re: A preview of the U.S. without pensions

#13

Post by newfoundglory »

friedButter wrote: post #9

> federal judge agreed that McDonnell-Douglas had illegally considered the pensions in its decision to close the plant. The employees case, presented by attorneys Joe Farris and Mike Mulder, showed that the company had tracked pension savings in its plant closure decisions WTF! So a company is not allowed to consider costs in a cost cutting decision? Was this not a conscious risk an employee took by accepting a job o…

It's more like the risk assumed by taking a job and expecting a salary - the company has to pay you for your work, even if they would rather not.

Re: A preview of the U.S. without pensions

#14

Post by ajmurmann »

shorttime wrote: post #8

Terrible spot to be in, hoping I will avoid it with a traveling retirement plan (401k). How do other 1st world countries manage elderly workers/people that should no longer work? SS is an option and I don't believe it will go bankrupt, wages of about 125K contribute to SS, anything larger does not. Just have to adjust that limit to keep it where it needs to be. So that helps a little bit.

I think most European countries have more generous/realistic state provided, financial retirement support.

Re: A preview of the U.S. without pensions

#15

Post by ghufran_syed »

Defined benefit plans are unaffordable, whether for a company or a government. But while defined contribution actually generate great returns, they have the problem that urgent expenses always crowd out saving, particularly for lower income groups (same as it would if income taxes were collected annually, or less frequently). Seems like the optimal solution is to combine the compulsory contribution part of the current social security system with a defined contribution system that can actually generate the income that will be needed. As far as I can tell, the pension system in Chile in the 80’s and 90’s was like this, and had the additional benefit of generating large amounts of investment capital during its operation which helped economic growth.

https://en.m.wikipedia.org/wiki/Pensions_in_Chile

Re: A preview of the U.S. without pensions

#16

Post by dguaraglia »

friedButter wrote: post #7

Is retirement planning (Live "below your means" and put in 20-30% or more of your salary towards long term investments), and family support (you fund your kids education and parents post retirement needs, and your kids fund your post retirement needs and your grandkids education) such an alien concept for Americans? When you manage it internally, instead of paying interest to a bank, you just have lost opportunity co…

It’s easy to consider putting 20 to 30% of your salary towards savings and investments when you are making Silicon Valley money. It’s not so easy when you are making minimum wage while paying school loans, or even if you are one of the families earning the median household income of ~$60k and you have a couple kids.

Re: A preview of the U.S. without pensions

#17

Post by lewis500 »

This is horrible. A few years ago I realized my parents were way behind on savings and just incessantly nagged them until they got on a good plan. They kicked and screamed the whole time ("You're our son. You can't tell us what to do."), but it's turned out to be one of the best decision I ever made. Next year they are actually going to retire. I dunno what I'd do if they had to work at Wal-Mart just to make ends meet.

Recently, I made this visualization of how US social security benefits are calculated:

https://lewis500.github.io/socialsecurity

Before I made it I actually had no idea. I think I might have worked a little harder to earn money when I was younger if I'd understood.

Re: A preview of the U.S. without pensions

#18

Post by jstewartmobile »

wildmusings wrote: post #6

Defined benefit plans, i.e. pensions, are a total disaster. They are premised on a fantasy: that the pension fund will make enough money on the market to to pay its liabilities, or that the backing entity will bail it out if not. Those are bad assumptions. The result is pension funds going broke across the country, and it's just getting started. Defined contribution plans, 401k's and such, are much more sensible. You…

I'm not sure 401ks are so great. Many charge ridiculous management fees for funds that track mundane things like the S&P 500, but if you want that employer match, no way around it.

Mostly a case of perfectly intelligent people throwing wads of money into the market on autopilot because that's all the 401k lets you do. Lambs to the slaughter!

edit: Example: Back when I was on 401k, was into a S&P500 fund that had an expense ratio over 1.5%. It may not sound like much, but that's compounded year-after-year. All of the other funds the 401k allowed had equally scandalous expense ratios.

After starting a business, I rolled over into an IRA. Switched to a different S&P500 fund with expense ratio of 0.09%. Same curve, but I keep more of my money.

It would be nice if people had more latitude in what they could put their retirement into--especially when it comes to tangible things, like buildings or equipment--that you can get some value out of even if the market happens to be down when you retire.

Re: A preview of the U.S. without pensions

#19

Post by bagels »

lewis500 wrote: post #17

This is horrible. A few years ago I realized my parents were way behind on savings and just incessantly nagged them until they got on a good plan. They kicked and screamed the whole time ("You're our son. You can't tell us what to do."), but it's turned out to be one of the best decision I ever made. Next year they are actually going to retire. I dunno what I'd do if they had to work at Wal-Mart just to make ends mee…

Would be nice if the birth year were adjustable.
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