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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

#171

Post by walshemj »

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…

Ah no it all depends on the accounting rules which have been fiddled by using unrealistic assumptions a lot of the DB deficits in the UK would not be as huge (and affordable) or actually be in profit if more realistic accounting rules where in place.

Ask yourself who benefits when you see scare stories about pensions

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

#172

Post by zackmorris »

dsr_ wrote: post #145

Then corporate America changed: Union membership waned. Executive boards, under pressure from financial raiders, focused more intently on maximizing stock prices. ... Exactly what led corporate America away from pensions is a matter of debate among scholars, but there is little question that they seem destined for extinction, at least in the private sector. Oh, please. Nobody seriously debates this, the answer is rig…

I second this. We have access to vastly more powerful technology than in 1980 and the GDP of most developed countries is many times what it used to be. We should all be earning at least twice what we did, and we should be working fewer hours, with more benefits. The retirement age should be 60 or even 55 today, maybe younger, and social security should have kept up with inflation to pay more.

All of this would have happened with unions and deciding in favor of labor whenever possible. Instead we did the opposite, and here we are in an unsustainable class war with the ugliest aspects of our past coming back to haunt us.

I am all for ending labor as we know it and letting machines do most of the work. But humans must still be in charge, not capital/corporations/sociopaths/liars/lobbyists and so on.

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

#173

Post by walshemj »

ThrustVectoring wrote: post #155
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…

There's a huge problem with defined contribution plans that isn't in defined benefit plans: the contributions belong to the retiree and get inherited by their children, rather than helping fund seniors as a class. Ideally you'd want some sort of tontine-like features, where people receive mortality credits based on their contributions and actuarial tables for their age. It'd mean that saving enough for retirement is…

Not always until recently in the uk you could not pass on any of your pension to your kids and there are limits now ie only you die before 75.

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

#174

Post by toomuchtodo »

zackmorris wrote: post #172
dsr_ wrote: post #145

Then corporate America changed: Union membership waned. Executive boards, under pressure from financial raiders, focused more intently on maximizing stock prices. ... Exactly what led corporate America away from pensions is a matter of debate among scholars, but there is little question that they seem destined for extinction, at least in the private sector. Oh, please. Nobody seriously debates this, the answer is rig…

I second this. We have access to vastly more powerful technology than in 1980 and the GDP of most developed countries is many times what it used to be. We should all be earning at least twice what we did, and we should be working fewer hours, with more benefits. The retirement age should be 60 or even 55 today, maybe younger, and social security should have kept up with inflation to pay more. All of this would have h…

I'm going to keep beating this drum: organize and vote.

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

#175

Post by walshemj »

ac29 wrote: post #123
advisedwang wrote: post #111

Earlier quoted context omitted.

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.

To add to that, this pension (and many others) was structured such that payouts are non-linear based on number of years worked, so for example, you might get: 0-5 years worked: no pension 5-10 years worked: 5% pension 10-20 years worked: 20% pension 30+ years worked: full pension By preventing workers from being able to work the full 30+ years, they never had to pay the full pension. One of the workers in the story m…

didn't US pensions vest year by year ie 30/60ths, or even 40/60ths

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

#176

Post by VLM »

rwmj wrote: post #163
VLM wrote: post #156

Earlier quoted context omitted.

The popular marketing reason why the pension disappeared is the factory closed. The real reason the pension disappeared is the proposed vesting duration was ridiculous. I am older so current jobs have no pension of course, but when I worked jobs with pensions, the vesting duration was typically something like 3 to 5 years for 100% vesting, sometimes only 2 years for 50% vesting. In fact I have a pension from a previo…

Thanks for replying. I found an article about "vesting duration" for US pensions, and if I'm understanding correctly this means that after you leave the job for years, the pension you are entitled to drops to half and (after more years) completely disappears. This seems incredible to me! Surely this would mean that younger workers who work for a company even for a long time but then leave would never collect a pensio…

The investopedia probably explains it better than I can

https://www.investopedia.com/terms/v/vesting.asp

https://www.investopedia.com/partner/investopedia/articles/r...

More like if you work somewhere for enough years, you'll the golden handcuffs of extra bonus, or the flip side if you quit each job after two years you get nothing.

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

#177

Post by yardie »

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.

I don’t know about what the pensions from the 50s and 60s but modern pensions have dependency clauses. Based on that the majority of those pensions would pay out. If the pensioner dies their spouse will collect from retirement or 65. If they have no spouse but children the children can collect until 18.

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

#178

Post by cryptonector »

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…

Early deaths help pension plans too, since those people will never draw from the plan. So, yes, average life expectancy is relevant here.

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

#179

Post by gedy »

lewis500 wrote: post #105
chowyuncat wrote: post #102

Earlier quoted context omitted.

How were they able to catch up in just three years?

By "a few years" I mean about ten or eleven years ago. Fortunately, that means they bought most of their stocks since 2008 and have gotten great returns. They were also fortunate to buy a house in a good neighborhood during the bottom of the slump, and to live in a cheap state. So they can sell their house and almost pay cash for a modest house a little further out from the city. Fortunately, the city has relatively…

Good for them, but do you see how this is essentially a gamble? Had they done the same 5-6 earlier they'd have lost a lot in both investments and real estate in 2008.

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

#180

Post by gedy »

maerF0x0 wrote: post #162

IMO a major issue is the expectance of someone else to take care of "me". I know that I'm retired for ~30 out of 80 years of my life and thus have to save ~3/8ths of my income, else starve. (Yes, some modifiers for tax brackets, compounding blah blah...) In the past people's children were the "investment" that paid the dividends into old age. Now we no longer have children to bear the burden. Yet we spend the normall…

I hear a lot about the nickel and dime stuff on how to save, but most people get eaten up by interest on home and education loans and medical costs. The other issue is interest rates being so low it amounts to a war on savings that neither party seems to willing to do anything about.
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