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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

#111

Post by advisedwang »

rwmj wrote: post #87

I'm missing a detail of the US system ... > Years ago, Coomer and his co-workers at the Tulsa plant of McDonnell-Douglas, the famed airplane maker, were enrolled in the company pension, but in 1994, with an eye toward cutting retirement costs, the company closed the plant. Did the McDonnell-Douglas company not pay into a separate pension fund, or did they raid the fund somehow?

It sounds like by closing the plant and stopping the employees reaching retirement age, they massively reduced the amount the employees were eligible to receive. Even if the pension fund was separate, by reducing eligibility this way they company had to pay less into it over the following years.

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

#112

Post by en4bz »

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…

This paper seems to assume life expectancy will increase indefinitely but this doesn't seem like it will happen due to the fact roughly 2/3 of people are overweight or obese.

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

#113

Post by skookum »

jo909 wrote: post #109

> The average life expectancy in 1950 was 68, meaning that a pension had to pay out only three years past the typical retirement age of 65. Today, average life expectancy is about 79, meaning that the same plan would have to pay out 13 years past typical retirement age. That's the wrong statistic to use and completely wrong conclusion. Life expectancy _for a 65 year old_ person in 1950 was another 13.9 years. That ro…

All the people dying before 65 absolutely do have a bearing on pension payment length: If an employer promises someone a pension at 35 and they don't live long enough to collect then the employer doesn't have to fund that commitment. Using life expectancy at 65 would only be valid if the pensions were being promised only to those who had already lived to 65 and at the time they were 65.

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

#114

Post by cjbillington »

jo909 wrote: post #109

> The average life expectancy in 1950 was 68, meaning that a pension had to pay out only three years past the typical retirement age of 65. Today, average life expectancy is about 79, meaning that the same plan would have to pay out 13 years past typical retirement age. That's the wrong statistic to use and completely wrong conclusion. Life expectancy _for a 65 year old_ person in 1950 was another 13.9 years. That ro…

I'm not sure it's quite as wrong as you say though. If the reason the life expectancy of a 65 year old is higher is that they are post-selected for not having died earlier, then it's the case that there were a bunch of people paying social security taxes that were dying before retirement. So there was more money for each one of those 13.9 years, because the people who survived were still able to use the cash put in by those that didn't. If you converted this into some figure that represented how many person-years of retirement the taxes from the average career supported, it would be closer to the three years, not the 13.9 years.

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

#115

Post by rukittenme »

tibbetts wrote: post #92
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?

If your economy isn’t growing then why would anyone want the resources you have “saved”.

You don't save "resources" you save wealth which can be a fractional share of someone else's growing economy. Not that a growing economy is required for ROI.

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

#116

Post by RobertoG »

Joeri wrote: post #68
user5994461 wrote: post #59

Earlier quoted context omitted.

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.

It's not a ponzi scheme, it's a numbers game. Basically the formula is: X * Y = A * B, where X is the number of retirees, Y the number of years they live past retirement on average, A the number of people who work, and B the number of years an average career lasts. What is happening in europe is that the right-hand side of the equation is producing a lower number (due to later career starts and less actively working…

Don't you think that your formula needs a productivity term somewhere?

How is that when we talk about this, nobody mentions that if the gross domestic product per capita goes up enough, there is not problem.

The 'savings' perspective makes only sense in the personal sense.

I mean, the problem is not money. If in 20 years we have robots, infrastructure, cheap energy, etc enough for feeding and taking care of everybody there is not problem.

If we don't, never mind the 'savings' that you have, because the real limit are real resources.

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

#117

Post by jo909 »

skookum wrote: post #113
jo909 wrote: post #109

> The average life expectancy in 1950 was 68, meaning that a pension had to pay out only three years past the typical retirement age of 65. Today, average life expectancy is about 79, meaning that the same plan would have to pay out 13 years past typical retirement age. That's the wrong statistic to use and completely wrong conclusion. Life expectancy _for a 65 year old_ person in 1950 was another 13.9 years. That ro…

All the people dying before 65 absolutely do have a bearing on pension payment length: If an employer promises someone a pension at 35 and they don't live long enough to collect then the employer doesn't have to fund that commitment. Using life expectancy at 65 would only be valid if the pensions were being promised only to those who had already lived to 65 and at the time they were 65.

This is totally an important factor for the pension provider, your are right about that. They will factor in how many people will never reach the payout age, the distribution of payout age, maybe if the spouse is covered too how long they might live, how may people switch their jobs and forfeit the pension etc.

I'd argue this has an impact on the "savings rate" per employee, but not on the average payout length.

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

#118

Post by RobertoG »

user5994461 wrote: post #103
Joeri wrote: post #68

Earlier quoted context omitted.

It's not a ponzi scheme, it's a numbers game. Basically the formula is: X * Y = A * B, where X is the number of retirees, Y the number of years they live past retirement on average, A the number of people who work, and B the number of years an average career lasts. What is happening in europe is that the right-hand side of the equation is producing a lower number (due to later career starts and less actively working…

The base is a ponzi scheme. Promise to pay people over 65 a guaranteed sum per month and hope that the taxes on working people can fund it. You're right that it doesn't have to be a ponzi scheme. The government could increase the age of retirement and/or lower the pensions. However that's not possible in practice, it doesn't get you elected and it'd provoke massive strikes for months. The government would rather accu…

>"Then the next generation has to deal with unfunded pensions and trillions of debt"

That doesn't make any sense. The next generation could have enough real resources or not. If they have they will be OK, if they don't they will have a problem. Real resources in the future come from investment now, not from "saving money".

Saving money makes sense in a personal perspective, but not as a nation.

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

#119

Post by RobertoG »

alkonaut wrote: post #80
hkmurakami wrote: post #67

Earlier quoted context omitted.

Basically only works when you have a growing economy and a growing population. Both things are sort of not true anymore in developed nations.

A declining/aging population is problematic but a stable one isn’t. And you need some buffers in the system to manage the variations in birth rates. I thought this type of system was the most common these days?

A declining/aging population could be not a problem if there is an increasing in productivity at the same time.

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

#120

Post by skookum »

jo909 wrote: post #117
skookum wrote: post #113

Earlier quoted context omitted.

All the people dying before 65 absolutely do have a bearing on pension payment length: If an employer promises someone a pension at 35 and they don't live long enough to collect then the employer doesn't have to fund that commitment. Using life expectancy at 65 would only be valid if the pensions were being promised only to those who had already lived to 65 and at the time they were 65.

This is totally an important factor for the pension provider, your are right about that. They will factor in how many people will never reach the payout age, the distribution of payout age, maybe if the spouse is covered too how long they might live, how may people switch their jobs and forfeit the pension etc. I'd argue this has an impact on the "savings rate" per employee, but not on the average payout length.

> I'd argue this has an impact on the "savings rate" per employee, but not on the average payout length.

Your argument is only correct if we define the average payout length to only factor in those employees who receive at least one check. However the original quote that you claimed was wrong is referring how much the pension has to pay out on average, which is not limited to those who live long enough to collect a payout. Their average payout length of 3 years factors in a whole bunch of $0 payouts, whereas your average ignores all of the zeros.

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