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Retirement Shock: Need to Find a Job After 40 Years at General Electric

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Re: Retirement Shock: Need to Find a Job After 40 Years at General Electric

#91

Post by RestlessMind »

plurgid wrote: post #63
pc86 wrote: post #44

Earlier quoted context omitted.

Corporations have not gotten rid of retirement plans, they've gotten rid of unsustainable defined benefit retirement plans (pensions) in exchange for defined contribution retirement plans (401ks).

Sure, but the fuller picture is more like this. Nearly every major industrialized nation's infrastructure was bombed to hell after WW2, except America. To the victor went the spoils, and so our economy boomed to a much much greater degree than it would have otherwise. This lasted for a generation or two, and certain aspects of that capitalist feeding frenzy were enshrined as cultural values. The idea that there was a…

Thanks for the historical perspective. Now what about times before 1950's, when societies were typically /not/ flooded with money? You mention that "The government SHOULD be providing healthcare, and decent retirement". Was that the norm before 1950's anywhere? If yes, how did the math work out?

I believe longer lifespans coupled with generous safety net provided by the government is a historical anomaly, propped up due to the growth spurt that happened post great depression + ww2. Now that things are reverting back to historical norms, we should rethink the way society is structured.

Re: Retirement Shock: Need to Find a Job After 40 Years at General Electric

#92

Post by youpassbutter »

nugget wrote: post #25
cgy1 wrote: post #8

Seems like an $85k/yr pension should be more than enough to retire on.

This is all smoke and no fire. The article's subject complains about his account value falling from $280k to $110k in value, meanwhile his pension has a net present value in the millions. I'm surprised this made it by the WSJ editors.

> I'm surprised this made it by the WSJ editors.

Why does that surprise you? Obviously the misleading and clickbaity headline will be chosen over the honest headline.

Re: Retirement Shock: Need to Find a Job After 40 Years at General Electric

#93

Post by ptero »

baldfat wrote: post #43
this_user wrote: post #22

This looks like a failure with portfolio construction to me. Keeping a lot of your net worth in the stock of one company is not a very good strategy for diversification. This is especially true when it is the stock of the company that you are working for, because if the company gets into trouble, you might not just lose your job, but also your savings. One easy improvement your this particular case would have been to…

I blame Corporations getting rid of Retirement Plans for the sake of profit. My father's side grandfather had 2 retirement plans, 1) Navy Seals (12 years) 2) NYC Handy man (25 years) My mom's side grandfather 1) Custodian in NYC 20 years + 2) Jazz Musician Union 10+ years. They both were able to live a decent life after retirement and didn't work a single day afterwards. This will not happen for me. I also have a pri…

Retirement plans at the time of your grandfathers started in a good state: low unfunded liabilities, high population growth and lower life expectancy after retirement than today. Thus such plans were generous.

In fact, they now seem way too generous: paying such obligations accumulated large unfunded financial liabilities (6 trillion is an estimate I saw a few times), which shows them as unsustainable. This means that the pensions of your grandfathers paid a lot of money of your children, so their parents (us) struggle to fix this.

The solution is not more of the same defined benefit schemes to stick our children with still bigger bills. We must do something else (defined contribution? variable benefit?)

Re: Retirement Shock: Need to Find a Job After 40 Years at General Electric

#94

Post by Zyst »

thewopr wrote: post #90
wnissen wrote: post #76

Earlier quoted context omitted.

Pensions are cheaper than 401(k) accounts. I will say it again, this is simple actuarial math: Pensions are cheaper than 401(k)s. Three reasons: 1. Some people will die before they collect, others will live far longer. With a pension the former subsidize the latter, and everyone who needs income gets it. In a 401(k) everyone has to save like they're going to live forever, or risk running out of money. If you keep you…

This is super interesting and something I've never thought about. One other issue I have noticed with 401k's. Do 401k's exacerbate inter-generational income inequality? I know a number of people who are going to, in the next few decades, inherit very sizable 401k accounts. This is great, in that their parents were very frugal, saved well, and had comfortable retirements. But on the flip side, a pension would have die…

That's the up side.

On the flipside, if the person who has a 401k finishes it, and has no more money they will then have to depend on their descendants for their livelihood.

Which can make the living standards of the descendant lower, because now they are taking care of their parent for the rest of their life. Which only gets more expensive the further they go (IE: Illnesses)

Re: Retirement Shock: Need to Find a Job After 40 Years at General Electric

#95

Post by cortesoft »

Jach wrote: post #85
cortesoft wrote: post #49

Earlier quoted context omitted.

While I agree with you, I think it is important to note that defined benefit plans aren't INHERENTLY unsustainable. If you do the math right and are realistic, you can off them. You just can't underfund them or assume unrealistic stock market gains.

What does the math look like to you? I mean, back when I was a teenager I realized that this century is different, I shouldn't expect to do what my dad did and end up (albeit through a series of acquisitions / mergers) at the same company for 30-something years with a payout plan at the end. Sometime in 2012 I saw this article[0] which starts off: "The average lifespan of a company listed in the S&P 500 index of lead…

It means we shouldn't tie retirements to the company you are working for.

Re: Retirement Shock: Need to Find a Job After 40 Years at General Electric

#96

Post by Brockenstein »

wnissen wrote: post #76
pc86 wrote: post #44

Earlier quoted context omitted.

Corporations have not gotten rid of retirement plans, they've gotten rid of unsustainable defined benefit retirement plans (pensions) in exchange for defined contribution retirement plans (401ks).

Pensions are cheaper than 401(k) accounts. I will say it again, this is simple actuarial math: Pensions are cheaper than 401(k)s. Three reasons: 1. Some people will die before they collect, others will live far longer. With a pension the former subsidize the latter, and everyone who needs income gets it. In a 401(k) everyone has to save like they're going to live forever, or risk running out of money. If you keep you…

Well average life expectancy in 1978 was 69.6 years, average life expectancy in 2018 is 78.7 years. So the problem with pension obligations is people in general tend to live longer, and the people who live far longer are living longer and there's more of them. Not enough people die young to offset that cost methinks.

And if people are consistently drawing more than they're paying in it's not sustainable. Every solution to that problem has drawbacks. You increase the premiums and fewer people pay in. You lower the benefits and maybe fewer people pay in too. It becomes a hard sell either way.

Compared to a 401k, where the company contributes 3% of an employee's salary (or somesuch) a year as an incentive to participate and if the employee screws themselves, that's their problem. It sounds a bit more attractive I imagine than all the other burdens a company has maintaining a pension program. And being responsible for it and to the recipients in perpetuity...

And you couple that with, not every sort of job operated a pension program even at their heyday. Not having access to a 401k program in 2018 doesn't mean your job would have had a pension program in 1978 either...

Re: Retirement Shock: Need to Find a Job After 40 Years at General Electric

#97

Post by beastman82 »

gaius wrote: post #41

100% of the blame lies with Jack Welch and his short-term thinking, reckless cuts that hollowed out the company, well now those bills are due. Did you know his own retirement package included lifetime usage of the corporate jets?

So Jeff Immelt and his 16 year reign is 0%? C'mon.

Re: Retirement Shock: Need to Find a Job After 40 Years at General Electric

#98

Post by Kalium »

cortesoft wrote: post #49
pc86 wrote: post #44

Earlier quoted context omitted.

Corporations have not gotten rid of retirement plans, they've gotten rid of unsustainable defined benefit retirement plans (pensions) in exchange for defined contribution retirement plans (401ks).

While I agree with you, I think it is important to note that defined benefit plans aren't INHERENTLY unsustainable. If you do the math right and are realistic, you can off them. You just can't underfund them or assume unrealistic stock market gains.

> You just can't underfund them or assume unrealistic stock market gains.

You're absolutely correct. You cannot do these things and have functional DB plans.

An issue arises when contemplating the incentives. Every person involved in the up-front planning for DB plans is incentivized to be wildly unrealistic about the future. It's not like anyone doing the negotiating will have any real consequences, so why not offer lower contributions to win your election / union approval / make quarterly numbers?

DC plans have the distinct benefit of helping incentives align. It puts the costs on the balance sheet in the short term, and accountability is much more immediate.

It's not a perfect compromise. For pretty much everyone, ideally run pensions are better. It's just that getting there has proven at best incredibly difficult and unreliable.

Re: Retirement Shock: Need to Find a Job After 40 Years at General Electric

#99

Post by crooked-v »

presidentender wrote: post #67
baldfat wrote: post #43

Earlier quoted context omitted.

I blame Corporations getting rid of Retirement Plans for the sake of profit. My father's side grandfather had 2 retirement plans, 1) Navy Seals (12 years) 2) NYC Handy man (25 years) My mom's side grandfather 1) Custodian in NYC 20 years + 2) Jazz Musician Union 10+ years. They both were able to live a decent life after retirement and didn't work a single day afterwards. This will not happen for me. I also have a pri…

> we had 5 kids and chose to have my wife stay at home for about 7 years You and your wife chose to have five children, and chose for her to work as a childcare provider, which we know is a low-paid gig. I'm very impressed that you managed to do that without going into debt, but I have little sympathy for other people who in similar situations find themselves struggling: the rest of us derive a smaller benefit from t…

Reasonably successful people having more children is a good thing, given the ever-growing pyramid-scheme nature of Social Security and other entitlements.

Re: Retirement Shock: Need to Find a Job After 40 Years at General Electric

#100

Post by ChrisLomont »

wnissen wrote: post #76
pc86 wrote: post #44

Earlier quoted context omitted.

Corporations have not gotten rid of retirement plans, they've gotten rid of unsustainable defined benefit retirement plans (pensions) in exchange for defined contribution retirement plans (401ks).

Pensions are cheaper than 401(k) accounts. I will say it again, this is simple actuarial math: Pensions are cheaper than 401(k)s. Three reasons: 1. Some people will die before they collect, others will live far longer. With a pension the former subsidize the latter, and everyone who needs income gets it. In a 401(k) everyone has to save like they're going to live forever, or risk running out of money. If you keep you…

This ignores demographic bubbles, such as the boomers retiring right now. When there were a lot of them working, there were a lot paying into the pension (which pays current workers). When there are less of them working there is not enough workers to pay benefits.

If your argument is that people pay into their own retirement as an account, then current people don't get pensions, unless they paid in (which the first group at some point did not do, so back to start).

At some point people must pay in to start, and that group is completely susceptible to the same market failures as before - if the market tanks when a large cohort is about to retire, then there will not be enough to cover them. Tapping the value from those not yet retiring to pay for those retiring will mean there is not significantly less for those not yet retiring.

You also overplay the value needed in a 401k. No one plans to live forever, so planning for a decade or a few after retirement is fine, with an expectation that at some point you may have to live of SS alone. This works fine, and doesn't need a fear inducing 25x salary savings.

Finally, companies fail, and with them pension plans fail. People move jobs a lot, so these pensions need to be mobile. Many pension plans require a decent amount of time to even get one, so people failing to meet that lose value over and over. At least a 401k is their money.

Your solution does not make these problems go away.

A better solution is to have a national pension plan, where everyone pays in, and everyone get some benefits. But that's SS, which already exists. Instead of 401ks and company pensions (why do people tie retirement plans with employers anyways?) increase SS taxes and payments.

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