GE freezes pension benefits for 20k employees • Hacker News Board

Re: GE freezes pension benefits for 20k employees

#61

Post by SketchySeaBeast » Mon, Oct 07, 2019, 2:24 PM UTC

chrisseaton wrote: post #42

lotsofpulp wrote: post #21

Earlier quoted context omitted.

I doubt it, defined benefit pension plans don't make financial sense in the current climate. Who is able to predict which company will be around in 30 to 60 years in the future, and what the economic climate will be? And much of the pension fund investments are going to the same place as 401k money anyway. Why not directly invest in VTI and skip paying all the pension fund managers and staff? It's not like they have…

I wouldn’t even agree to getting a defined benefit pension these days - why wouldn’t you want to invest your own money instead of letting one company you happened to work for control your pension? I have a defined benefit pension from a previous employer and frankly I count it as zero in my financial planning since I have no idea if it’s actually coming or not.

It still has value, assuming you're intending on working until you retire and the company has no signs of failling - why wouldn't you want a (nearly) guaranteed income for the rest of your life? That doesn't preclude you from investing your own extra cash into investments.

I understand the dynamics have changed, but my boomer parents and in-laws are both enjoying retirement with the fruits of a defined benefit pension, and both are quite comfortable.

Re: GE freezes pension benefits for 20k employees

#62

Post by hammock » Mon, Oct 07, 2019, 2:24 PM UTC

joeyrideout wrote: post #22

An important distinction to make with GE is that most of their pension plan is "defined benefit" as opposed to "defined contribution". The latter is much more common nowadays because it avoids these massive long-term obligations to the company. EDIT: Added "most of". A percentage of their employee base has already transitioned to defined contribution.

"Defined contribution" is a euphemism to give a softer landing for employees that were expecting a pension. Workers should consider not using that language. The fact is the words are 50% the same but the product is 100% different.

Re: GE freezes pension benefits for 20k employees

#63

Post by chrisfinazzo » Mon, Oct 07, 2019, 2:25 PM UTC

lotsofpulp wrote: post #30

joeyrideout wrote: post #22

An important distinction to make with GE is that most of their pension plan is "defined benefit" as opposed to "defined contribution". The latter is much more common nowadays because it avoids these massive long-term obligations to the company. EDIT: Added "most of". A percentage of their employee base has already transitioned to defined contribution.

In the US, "pension" typically means a defined benefit pension.

In the past, this was generally true, but not anymore. Case in point, my great uncle - yes, that's a thing in genealogy, look it up - was fortunate enough to retire with one in the late 80's/early 90's.

You don't even have to know much about the system to understand how this works.

Defined benefit - Your pension is X, determined by rank, years of service, etc.

Defined contribution - While the above conditions may still apply, the bottom line of how well you do is determined by how much you put in on a regular basis.

Not hard to imagine why most companies made the switch or simply stopped offering traditional pensions - they're really expensive over the long term.

Re: GE freezes pension benefits for 20k employees

#64

Post by mywittyname » Mon, Oct 07, 2019, 2:25 PM UTC

phonebanshee wrote: post #53

helpPeople wrote: post #33

Earlier quoted context omitted.

Do people not understand this is how pensions work. If your company isn't there when you retire, you don't get a pension. I find it incredibly risky to rely on pensions. I don't quite understand why employees are so excited about non cash benefits.

Why do you think that? httpss://en.m.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corporation

Note that certain non-profits are not obligated to be federally insured. The most notable example of this is hospital staff, as a significant number of hospitals are run by religious organizations.

Re: GE freezes pension benefits for 20k employees

#65

Post by eternalny1 » Mon, Oct 07, 2019, 2:25 PM UTC

chrisseaton wrote: post #42

lotsofpulp wrote: post #21

Earlier quoted context omitted.

I doubt it, defined benefit pension plans don't make financial sense in the current climate. Who is able to predict which company will be around in 30 to 60 years in the future, and what the economic climate will be? And much of the pension fund investments are going to the same place as 401k money anyway. Why not directly invest in VTI and skip paying all the pension fund managers and staff? It's not like they have…

I wouldn’t even agree to getting a defined benefit pension these days - why wouldn’t you want to invest your own money instead of letting one company you happened to work for control your pension? I have a defined benefit pension from a previous employer and frankly I count it as zero in my financial planning since I have no idea if it’s actually coming or not.

On the flip side I know people who have completely squandered their 401k due to poor financial habits, and others who are getting a check, monthly, for life.

Guess which one of those two is happier? Sure, you may say the first group was foolish, but we are talking your average American workers here not an investor-savvy class.

Perhaps make it an option, if you want to gamble go for it, if you lose don't come crying for your retirement checks.

Re: GE freezes pension benefits for 20k employees

#66

Post by lotsofpulp » Mon, Oct 07, 2019, 2:25 PM UTC

rileymat2 wrote: post #55

lotsofpulp wrote: post #21

Earlier quoted context omitted.

I doubt it, defined benefit pension plans don't make financial sense in the current climate. Who is able to predict which company will be around in 30 to 60 years in the future, and what the economic climate will be? And much of the pension fund investments are going to the same place as 401k money anyway. Why not directly invest in VTI and skip paying all the pension fund managers and staff? It's not like they have…

The simple answer is that group mortality is easier to estimate and plan for than individual mortality. At 65, you do not know if you are going to live to 70 or 101, so you need to plan your 401k accordingly, pessimistic. Couple that with the fact that many many americans could not save enough to last to 101, but could last until 72. So they are left with the choice of living more poorly than they should or running o…

Defined benefit might make sense on a societal level, aka Social Security benefits in the US.

On an employer level, it does not make sense as they have no idea if they will exist in the next 10, 20, 30 years, especially with automation and globalization changing the economic environment very quickly. Which is exactly what real life shows, as companies are jettisoning defined benefit pensions to stay competitive.

On an individual level, a pension plan also doesn't make sense, as you can do what pension fund managers do via target date funds and save the money spent on paying the pension fund managers. And avoiding the corruption risk of employers underfunding and fund managers malinvesting.

If you want protection that you will have income until you die, one should purchase an annuity. However, a much cheaper and better idea in my opinion, is raising a family that will support you in your old age, because it's prohibitively expensive to purchase the kind of care that comes from loving relationships in your old age.

Re: GE freezes pension benefits for 20k employees

#67

Post by ceejayoz » Mon, Oct 07, 2019, 2:25 PM UTC

helpPeople wrote: post #33

mschuster91 wrote: post #9

... and this is why pension schemes should be managed by the government or at least tightly regulated. Just imagine GE going bankrupt - who's gonna pay the pension, then? The government in a bailout or what?

Do people not understand this is how pensions work. If your company isn't there when you retire, you don't get a pension. I find it incredibly risky to rely on pensions. I don't quite understand why employees are so excited about non cash benefits.

> If your company isn't there when you retire, you don't get a pension.

https://en.wikipedia.org/wiki/Pension_Benefit_Guaranty_Corpo...

Re: GE freezes pension benefits for 20k employees

#68

Post by AdrianB1 » Mon, Oct 07, 2019, 2:26 PM UTC

twodave wrote: post #7

Do pension funds rely on a growing population in order to sustain themselves? I wonder whether they'll see a resurgence as the baby boomers die off and the age distribution in the U.S. becomes more uniform, or if these sorts of plans are a thing of the past.

In Europe, yes. In US, there are some good answers here.

Re: GE freezes pension benefits for 20k employees

#69

Post by mkohlmyr » Mon, Oct 07, 2019, 2:28 PM UTC

mschuster91 wrote: post #9

... and this is why pension schemes should be managed by the government or at least tightly regulated. Just imagine GE going bankrupt - who's gonna pay the pension, then? The government in a bailout or what?

Just wait until your own trusty government is running low on funds...

Ultimately however you have to trust some third party - to some degree - not to waste or misuse your money.

Re: GE freezes pension benefits for 20k employees

#70

Post by SketchySeaBeast » Mon, Oct 07, 2019, 2:28 PM UTC

joeyrideout wrote: post #41

lotsofpulp wrote: post #30

Earlier quoted context omitted.

In the US, "pension" typically means a defined benefit pension.

Not any more... "The percentage of workers in the private sector whose only retirement account is a defined benefit pension plan is now 4%, down from 60% in the early 1980s. About 14% of companies offer a combination of both types." [1] [1] https://money.cnn.com/retirement/guide/pensions_basics.money...

All that tells me is that there are no more pensions, not that the definition has changed. Employers are contributing money now, but have pushed any risk onto the employee, making it feel pretty worthless as a retirement strategy.