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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

#51

Post by ec109685 »

1001101 wrote: post #32

World Economic Forum estimates retirement shortfalls in public pension/private pension/individual savings in 2015 at 70 trillion$, and projects nearly half a quadrillion (400 tril) shortfall in 2050, with the lion's share belonging to the US. [1, page 7] Interest rates stuck at the 0 bound (and negative real) for nearly a decade haven't helped. I foresee a bumpy ride figuring out who gets stuck with the bill. [1] htt…

Why will the world be so much worse off at 400 trillion instead of 70 trillion?

Presumably “the world” will have many many more folks making more money by then given the rates of economic growth in third world countries. 10B people can cover 400T in 10 years paying just $10 a day.

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

#52

Post by konschubert »

rukittenme wrote: post #37

Here's a fun game for everyone. If you don't save, and your company doesn't save, and your government doesn't save then how the hell do you figure you're going to retire?

You can have a "contract of the generations", where the younger generation finances the pensions of the older generation through social security payments.

Many countries do it like that.

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

#53

Post by ec109685 »

ghufran_syed wrote: post #15

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 curren…

Why are defined benefit plans always unaffordable?

You don’t want people’s retirements to be affected by the value of their investment at the moment of withdrawal. Instead you want the benefit to incorporate the expected value at retirement of the investment over the long run.

The problem with many pensions is that the businesses themselves supporting them essentially went belly up as competition, technology and investors took their toll.

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

#54

Post by jstewartmobile »

hkmurakami wrote: post #45
jstewartmobile wrote: post #18

Earlier quoted context omitted.

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 e…

When was this / which vendor was this? My barebones Fidelity 401k plan which only gave me 12 funds to choose from had a S&P500 fund with an expense ratio of ~0.2% iirc. (I don't remember what sort of fees there were in the overall 401k account though)

That was almost 15 years ago, so I'd have to do some digging to name names. On the whole, perhaps things have gotten better since then.

It is still a thing though. Father-in-law had most of his stuff at Edward Jones. Some of their fees put mine to shame:

https://www.edwardjones.com/planfees/fees-compensation/mutua...

edit: Most of his had different titles, but their largest holdings were the same handful of stocks. We overlaid the S&P 500 on top of most of them--practically identical performance from time of inception!

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

#55

Post by user5994461 »

selestify wrote: post #38
user5994461 wrote: post #34

Earlier quoted context omitted.

It varies vastly by country. In France, the state calculates a percent of your income during the 4X years you were working and gives you that as a pension. The estimation can be pretty complicated, but that's fair enough for a one line explanation. The system will collapse eventually. More and more elderly to support by less and less active workers. The younger population is suffering from vast unemployment (25%) and…

> More and more elderly to support > The younger population is suffering from vast unemployment It appears there is a lot of work to be done and a lot of idle workers to do it. The fact that both can exist in tandem seems like an indictment of how horribly inefficient our economic systems currently are.

Not sure what you mean. Retirees don't create jobs. They just get money handed to them monthly as promised by the pension formula decided decades ago. (that money is supposed to come from taxes on active workers's salaries)

The whole system collapse when taxes are not enough to cover the pensions that were promised. It's a ponzi scheme.

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

#56

Post by jstewartmobile »

microcolonel wrote: post #48
jstewartmobile wrote: post #22

The fundamental problem with pensions, however you arrange them, is that no one has a crystal ball. If you were FDR, how could you possibly know that average person will live 10 years longer, or that we're going to end up with birth control and a consequent demographic cliff?

> how could you possibly know that average person will live 10 years longer This is not really what happened though, people who made it to working age generally did not live that much longer.

So you're saying that they were offering a pension with the expectation that most people would die before they could claim it?

Not so much a dispute as a clarification...

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

#57

Post by JoshTriplett »

jstewartmobile wrote: post #30
nunez wrote: post #24

Earlier quoted context omitted.

Yeah the only time it makes sense to have a 401k is if your company matches your contributions.

Don't they all have a match? It would be nice if people could keep the match and have more control over their portfolios. Buy & sell stocks, bonds, commodities, etc. whenever instead of a very small basket of mutual funds that can only be juggled a few times a year.

> Don't they all have a match?

No, some employers just pay in whether you do or not, and your contribution doesn't in any way change theirs.

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

#58

Post by hkmurakami »

jstewartmobile wrote: post #54
hkmurakami wrote: post #45

Earlier quoted context omitted.

When was this / which vendor was this? My barebones Fidelity 401k plan which only gave me 12 funds to choose from had a S&P500 fund with an expense ratio of ~0.2% iirc. (I don't remember what sort of fees there were in the overall 401k account though)

That was almost 15 years ago, so I'd have to do some digging to name names. On the whole, perhaps things have gotten better since then. It is still a thing though. Father-in-law had most of his stuff at Edward Jones. Some of their fees put mine to shame: https://www.edwardjones.com/planfees/fees-compensation/mutua... edit: Most of his had different titles, but their largest holdings were the same handful of stocks. W…

those pdfs give basically no inforamation at all. I certainly hope that the equity funds are actively managed (rather than passively managed, though tbh actively managed funds that are provided in a 401k plan are going to be crap about 95%+ of the time) if they are charging 1%+ in fees.

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

#59

Post by user5994461 »

konschubert wrote: post #52
rukittenme wrote: post #37

Here's a fun game for everyone. If you don't save, and your company doesn't save, and your government doesn't save then how the hell do you figure you're going to retire?

You can have a "contract of the generations", where the younger generation finances the pensions of the older generation through social security payments. Many countries do it like that.

That's a ponzi scheme. That's what many countries in Europe do and that is currently collapsing.

It takes something like 4 active workers to pay the pension of 1 current retiree. The proportion was fine after the baby boom, it's not anymore and it's getting worse.

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

#60

Post by microcolonel »

jstewartmobile wrote: post #56
microcolonel wrote: post #48

Earlier quoted context omitted.

> how could you possibly know that average person will live 10 years longer This is not really what happened though, people who made it to working age generally did not live that much longer.

So you're saying that they were offering a pension with the expectation that most people would die before they could claim it? Not so much a dispute as a clarification...

I'm saying that life expectancy at birth is a misleading statistic when it comes to gauging the ratio of inputs to outputs on pension programs of any sort.
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