[HN Gopher] The Broken Promise of Retirement
___________________________________________________________________
The Broken Promise of Retirement
Author : bryanrasmussen
Score : 58 points
Date : 2021-06-27 18:41 UTC (4 hours ago)
(HTM) web link (www.nybooks.com)
(TXT) w3m dump (www.nybooks.com)
| birdyrooster wrote:
| I'm so tired of hearing about the "middle class" because it
| excludes a huge amount of people that actually make this world
| work while pretending to be inclusive. It's super gross.
| xf1cf wrote:
| Regardless of your feelings you're missing the point. The
| middle class is the bellwether of the economy. Though, I don't
| think you're truly interested in the economy at large.
|
| When middle class wages go up, small businesses open, they
| employ more people, creating more middle class people, and the
| cycle continues ad infinitum. The middle class pays the bulk of
| the taxes since they lack the finances to avoid them, and
| additionally is responsible for creating the bulk of the jobs
| in small business. The middle class also leads consumption. See
| the previous point for why this is important.
|
| If the middle class fails everything below them fails. The only
| people that win in all scenarios are the ultra wealthy. If the
| middle class cannot retire, effectively no one can retire.
| Since their suffering is magnified in the lower economic
| strata.
| chrisseaton wrote:
| > I'm so tired of hearing about the "middle class"
|
| Well then don't read articles about middle class concerns like
| retirement, in middle class publications like the New York
| Review of Books.
| sonograph wrote:
| Off topic: Is it normal for NYBooks to publish things early?
| Shows as July 1, 2021
| sonofhans wrote:
| Magazine dates are typically the date the issue is removed from
| shelves, not the date it first appears. So they likely
| synchronize with the actual date of print availability.
| ElViajero wrote:
| > July 1, 2021 issue
|
| I guess that they published the July issue some days early. I
| guess that if the month issue is already finished, it makes
| sense to publish it.
|
| Here you can see the mail-date cover-date relationship for the
| physical publication: https://www.nybooks.com/publication-
| schedule/
|
| The magazine with cover date "July 1, 2021" is mailed on "June
| 8, 2021"
| chrisseaton wrote:
| Magazine issue dates are usually for the month they are on
| sale, so realistically a month ahead of when you'd buy it if
| you're buying it as it comes out.
| Etheryte wrote:
| I'm not up to date with the nuance of the US pension system, but
| this article seems highly loaded:
|
| > For decades, conservative governors and state legislators [...]
| have worked to undermine public employee pensions.
|
| > Last year, as the Covid-19 pandemic raged, Senate Majority
| Leader Mitch McConnell denied governors' appeals for federal
| emergency aid because he saw an opportunity to punish states for
| their pension debts.
|
| And so forth. Granted, I don't know the history behind all of
| this, but even with the benefit of the doubt these seem very
| stark takes without any additional context.
| jmclnx wrote:
| In the US there is a "fund" that is suppose to be paid into by
| Private Companies, Unions and others that is like a Pension
| Insurance. That fund is Extremely underfunded. If your Company
| goes bust or the Union implodes, last I heard (many years ago),
| that fund could only cover a bit less than 50% of your
| benefits, so you will get a massive cut. Also in the past, if
| you worked for the Federal or State Gov, you did not get Social
| Security because you paid into a pension. I do not know if that
| is still true.
|
| But the Federal Gov through cuts (we all know who pushed those
| cuts) and Union Busting, is causing the whole pension system to
| go bust since pensions work only if the Company or Union is
| growing and people are there to pay into it. Now that union
| membership is optional in many states, money is not flowing
| into the fund.
| bradleyjg wrote:
| > since pensions work only if the Company or Union is growing
|
| There's a name for a scheme like this---pyramid.
| amusedcyclist wrote:
| How is it loaded if its true ? Its not neutral to avoid blaming
| the party that is actually responsible for the bad thing being
| discussed
| _red wrote:
| Not only that, but undoubtedly they also support the modern
| neo-liberal Globalist system....so they want to offshore all
| jobs to slave factories in China, allow millions of
| 'undocumented' workers to depress salaries, AND bemoan that we
| can't have multi-decade retirement systems fully funded.
|
| Its astounding how the democrats have gone along with these
| ideas for so long...
| [deleted]
| supernova87a wrote:
| I cannot get to the entire article (paywalled) -- but I will
| point out an issue I know is plaguing US municipal and state
| pensions.
|
| Aside from the permanent administrative staff, many funds are in
| the hands and political control of people generally wholly
| unqualified to understand and manage them, and who have at most
| their elected positions on the line if it goes badly. It's not
| their money, so what does it matter if they just apply expertise
| to the fund's management with all the part-time attention of a
| high schooler?
|
| The amount of rank amateurism in deciding the fate of many, many
| billions of dollars is incredible. Like less-than-Excel
| spreadsheet sophistication.
|
| Take a couple of general examples:
|
| -- Many state/local funds estimate or forecast some optimistic
| annual return % when they set the benefits level. Then they never
| revisit or adjust contributions to account for when the market
| returns fall. Or they do absolutely stupid things like increase
| benefits when a certain year looks better than average ("our hard
| working state employees deserve to participate in gains in the
| market, blah blah blah")
|
| -- They'll set labor contracts with no eye towards what the
| promised benefits will cost 25 years from now. Who cares? The
| elected officials now won't be around when the bill comes due,
| and the incentives to not get tossed out of office for being
| responsible and clamping down on the expensive party are much
| more real than paying a few dollars more decades from now.
|
| -- My favorite example: under years of mismanagement of rank
| amateurs (as I named above), Detroit discovered that its pension
| fund had been habitually paying out "13th paychecks" each year --
| an extra check in December above what was planned, as a xmas gift
| to employees/retirees, because "it looked like our fund was doing
| well, and these people need that money to make ends meet".
|
| You may be surprised at how bad the situation is in every state
| and city (with few exceptions) thanks to the bad incentives that
| these systems create. And few rewards for people who are
| responsible enough to try to fix it before it becomes critical.
| People have been pointing to waves of bankruptcy and spiraling
| costs in the near future, for years now.
|
| And you wonder why we can't fund infrastructure and other nice
| things.
| themodelplumber wrote:
| > 80 percent of the tax benefits go to the top 20 percent of
| taxpayers.
|
| I hope someday we can all see why this is both amazing and
| ridiculous...
|
| > In Rescuing Retirement, Ghilarducci and James promote what they
| call a "Guaranteed Retirement Account" (GRA), a system of federal
| retirement savings accounts that would combine features of
| defined benefit and defined contribution plans.
|
| Nice to see a proposal in the article.
|
| > GRAs would be professionally invested and would, Ghilarducci
| and James argue, generate greater returns than existing 401(k)s
| by taking advantage of access to the more profitable investments
| and lower fees that large pools of assets can offer. The accounts
| would follow workers throughout their careers, even if they
| changed employers. When the time came, the GRA would be
| transformed into an annuity, which, alongside Social Security,
| would pay out a consistent and lifelong income.
|
| I don't know anything about 401(k)s but do they really operate on
| some foundational condition of less-profitable investments and
| higher fees?
| jdeibele wrote:
| The key is the administrator. This might be Vanguard or
| Fidelity or it could be a much smaller company, probably local.
|
| Some companies have experienced people looking at many
| companies and picking one based on the lowest costs and wide
| selections.
|
| Other companies might pick Joe Blow Company because the
| salespeople are attractive and the lunches and dinners are
| expensive. Vanguard might have salespeople if you're big enough
| but most companies aren't.
|
| Locally, there was a company that got its hands on a lot of
| union pension money. They took the trustees on safaris in
| Africa, etc.
| https://www.wweek.com/portland/article-23437-sept-21-2000-th...
| In a lot of cases, the people making the recommendations aren't
| evil but just overwhelmed by the personalized attention that a
| high-cost alternative can give them.
| tclancy wrote:
| I am guessing the last part means on average. As a sole
| investor, the fees on any fund will always be higher than what
| is available to an institutional investor. And this would make
| quite a big institutional investor.
| namdnay wrote:
| I don't see what investment is more profitable and lower fee
| than a bog standard vanguard ETF
| jimhefferon wrote:
| You need the money to be there in forty years. What happens
| if, say, US stocks did in that time what Japanese stocks did
| in the past decades, and you bet wrong? Asking average people
| to be good at finance is potentially a big ask.
| pessimizer wrote:
| Nothing worse than if your manager screws up and loses
| everything, which is far more likely. Especially since the
| criteria for choosing who's going to manage these massive
| funds is going to be gamed.
| mlyle wrote:
| I don't want to "bet" with my long term investments
| intended to provide for basic survival. Instead I want to
| deploy things to a weighted average of equities (small,
| big, domestic, and world), bonds, and other assets (real
| estate) and occasionally rebalance (take profits).
|
| And, one doesn't need some magical financial acumen to do
| this. You can buy a "target retirement" fund which simply
| holds things in a ratio (based on financial industry
| consensus) recommended for your retirement age.
| themodelplumber wrote:
| Vanguard ETF recommendations, the last-ditch concealed weapon
| of every contingency-focused investor in online discourse for
| like the last 20 years. :-) Funny to see that here.
| sbeller wrote:
| > I don't know anything about 401(k)s but do they really
| operate on some foundational condition of less-profitable
| investments and higher fees?
|
| The (HR person of the) employer chooses what to allow in a
| 401k. Normally you have a dozen funds or so available. And the
| choice by the employer doesn't necessarily align with the
| employees interests, as the high fee funds would love to send
| you that amazon gift card, whereas the low fee funds wouldn't
| even reach out to you. ;-)
| themodelplumber wrote:
| That's pretty wild! Wow. Seems like one of those setups
| that's one 401k-mockumentary away from imploding.
| smitty1e wrote:
| > "Guaranteed Retirement Account" (GRA), a system of federal
| retirement savings accounts
|
| Given Social Security, not only as a concept, but how it has
| been used as a piggy bank by a spendthrift Congress, the
| likelihood that a GRA would suffer a similar result is close to
| certain.
|
| "Giving money and power to government is like giving whiskey
| and car keys to teenage boys."--P.J. O'Rourke
| themodelplumber wrote:
| Just speaking from experience here: One P.J. O'Rourke quote
| and I'm off to where the minds are open--nothing personal.
| danbruc wrote:
| Have the currently working part of the population pay a tax on
| their working income, hand this money out to the currently
| retired part of the population, to some extend proportional to
| their contribution during their working years.
| wmf wrote:
| Can't tell if trolling. This is called Social Security.
| ed25519FUUU wrote:
| > _Pensions represent more than their economic value. They carry
| a powerful moral recognition: workers deserve financial stability
| and the freedom it brings throughout their lives. Municipal and
| state employees contribute to their pensions with every paycheck,
| and employer contributions supplement their savings._
|
| I don't know how it came to be that politicians could promise
| impossible things to public employees in exchange for power, and
| when it turned out to indeed be impossible, somehow the taxpayer
| foots the bill.
|
| I'm under no obligation to carry forward an unsustainable
| promise. It should have never been promised in the first place.
| The taxpayer, who gets NONE of this, is not the one who should
| pay the bill.
| cortesoft wrote:
| The voters elected people who made that promise. Of course
| taxpayers are on the hook for promises made by politicians.
|
| The taxpayer DID get something for this. They got public
| employees who took less money up front in return for a good
| pension. This saved the taxpayers money in the short term.
|
| Under your argument, is the government not required to keep ANY
| promise? "The government should never have promised to pay back
| these treasury bills. Taxpayers don't get anything from
| redeeming them, we shouldn't pay off any of the government
| debt!"
| Spooky23 wrote:
| The taxpayer benefits by paying tomorrow for a sandwich today.
| Government employees trade lower cash compensation for
| stability and more secure benefits.
|
| I'm sure you get upset when you read about some big company
| charging billions for some mismanaged project. That's generally
| the alternative.
|
| You may not feel an obligation for your government to follow
| the law and responsibly manage its obligation to pay some 70
| year old former librarian her modest pension. Hopefully your
| understanding about government not meeting obligations holds
| when you can't get to work because a highway bridge is closed
| due to deferred maintenance, or your parents don't get adequate
| care because your state health department fails to effectively
| regulate nursing facilities.
| mbg721 wrote:
| Those failures are all going to happen anyway, because the
| underlying promises were always unsustainable. The question
| is whether or not we're happy declaring today's 70-year-old
| public officials the winners and today's kids the losers.
| baybal2 wrote:
| Unfortunately, our generation of nineties, and later will have to
| work until our deathbed.
|
| That's the brutal truth.
| bradleyjg wrote:
| Your generation has embraced FIRE in a way a lot fewer in mine
| ever did. Some people are clearly making it work. Others are
| taking out more student loans for their third masters degree
| because their other careers weren't an authentic manifestation
| of their inner identities.
| baybal2 wrote:
| I don't understand you
| bradleyjg wrote:
| https://en.m.wikipedia.org/wiki/FIRE_movement
|
| Some people born in the early 90s are already retired.
| baybal2 wrote:
| I understood you now
| MarkusWandel wrote:
| Is it really as political as that as in "the big bad republicans
| ate my pension"?
|
| Juicy pensions are on the decline everywhere. The company I
| started working for at age 23, so many years ago, in all its
| vertically integrated, multinational glory, provided, at the
| time, pensions you really could continue living a middle class
| lifestyle on. I duly got into that pension plan, with the huge
| pension adjustments that entailed (greatly reduced ability to pay
| into your RRSP) but that future defined benefit pension was worth
| it.
|
| Except that $bigco went bust, and when the dust settled, we got
| cash payout of the some percentage of the deemed value of the
| accrued pension that they could recover from the financial
| wreckage, and that was that. No pension at all.
|
| Now I and everyone else is just on defined contribution plans,
| where between your own and the company's contribution you put in
| maybe 10% of what it would take to live on, per year. The rest is
| supposed to miraculously come from compound gains, using the old
| wisdom that anyone can get 10% per year without effort.
|
| What does that mean in real life terms? Live cheap, far below
| your financial means - one basic car instead of his & hers SUVs,
| a basic house in a decent neighbourhood instead of the latest 5K
| square feet monstrosity and so on, and try to save a good 1/3 of
| your income for the future. Barring a financial meltdown or
| runaway inflation, I think we'll make it. The fact that "runaway
| healthcare costs" are not a factor here helps a lot, though
| without a company plan, you're on your own for all dental work
| and (up to a certain age) all prescription drug costs.
|
| Anyway the economics is simply this: Work for 40-45 years and
| accrue enough to live another average 25 years after you retire.
| The $$ have to come from somehwere. You see a lot about super
| juicy public sector pensions in the USA where people can retire
| in luxury before age 50... probably outliers, as is the "evil
| people stole the pension fund" situations. On the whole, it's
| just that people live longer.
| Spooky23 wrote:
| During the 80s, get tough on crime politics mushroomed pensions
| and healthcare obligations because state/local governments
| lacked the cash flow for raises during higher inflation times.
|
| Police and fire pensions usually drive this stuff because
| overtime assigned by seniority spikes salaries and pensions.
|
| The "evil republican" angle is that "fiscally conservative"
| politicians usually balanced budgets by cutting pension
| contributions or buying support by reducing local contributions
| during tight budget times. Democratic legislators and governors
| did this too, but this type of fiscal behavior is a
| "conservative" trademark.
|
| States like New York have mostly funded pensions, even with
| generous pension plans. The "secret" is easy - governments,
| especially local governments have to pay.
| toomuchtodo wrote:
| The US workforce (at the time) was sold on 401ks as a
| replacement for pensions, when they're really for only the
| highest compensation earners as a tax dodge [1]. Predictably,
| very few made enough to contribute to a 401k in a manner that
| would replace the safety of pensions, and now large cohorts
| nearing retirement are left with little while shareholders
| captured profits that previously contributed towards funding
| pensions. Tada!
|
| [1] https://news.ycombinator.com/item?id=21827154
| clairity wrote:
| > "The US workforce (at the time) was sold on 401ks as a
| replacement for pensions, when they're really for only the
| highest compensation earners as a tax dodge..."
|
| pensions don't really make sense though, because they create
| adverse incentives all around. first, for the pensioner, who
| transfers future risk to the pension, and by extension to the
| company, its customers, employees, and shareholders. and
| second, it's a big pot of money just sitting there begging
| the greedy to tirelessly and surreptitiously work to siphon
| off just a tiny spigot of it. and those are just the two most
| obvious ones.
|
| parhaps the risk profile is too far in the opposite
| direction, but 401(k)'s could be fixed, for instance, by
| requiring companies to set up and contribute inverse-
| proportionally to monthly take-home pay, and tax the company
| progressively on contributions based on total compensation,
| so that highly-paid executives who need a 401(k) the least
| would be discouraged from that avenue of compensation, while
| the least-paid employees get a (partially-)funded retirement
| account automatically.
| gizmo686 wrote:
| The issue with the 401k is that it is essentially an anti-
| progressive tax. It is there as a way for the government to
| encourage and subsidize retirement savings; but it does so
| by providing a 1:1 deduction on taxable income (with a
| choice of taking the deduction now or during retirement).
| This means that you get a greater benefit (read subsidy) if
| you are at a higher tax bracket; even if you are looking at
| the benefit in percentage terms instead of absolute.
|
| If you don't pay income tax, you get no benefit from a
| 401k.
|
| We can go a long way to solving this by just making the
| subsidy a flat refundable tax credit. If we wanted to make
| it progressive, we could to the inverse of progressive
| income tax: by making the first $X get you a Y% credit,
| with a decreasing credit as you go up in contribution
| brackets.
| bradleyjg wrote:
| The savers tax credit is similar to what you are
| proposing.
|
| https://www.investopedia.com/articles/retirement/04/03170
| 4.a...
| [deleted]
| forrestthewoods wrote:
| And yet defined benefit pensions are pyramid schemes that are
| increasingly top-heavy and too many retirees and not enough
| workers to pay for their luxurious and impossible retirement
| benefits.
|
| It is not possible for anyone to work 30 years and then
| retire for another 30 that pay out their end-of-career
| salary, that is likely artificially inflated with crazy
| overtime.
|
| The pandemic relief bills included almost 90 billion dollars
| in free money to bailout pensions. Pensions are insolvent and
| require corrupt bailouts to stay alive. It's all super super
| gross.
| [deleted]
| an_opabinia wrote:
| > shareholders captured what previously funded pensions
|
| Hmm, but passive retiree investors, on whose behalf all those
| institutions like Blackrock are ultimately investing, have
| probably contributed enormously to a rise in asset values.
| Shareholders gain a lot from people dumbly saving in
| investment vehicles, whether pensions or 401ks.
| Afforess wrote:
| Agree. 401ks were never intended to be a complete retirement
| plan or pension replacement, and are frankly untested at the
| scale that they are now being used for. It's a little scary
| that a tiny carveout of the larger IRS code for pensions was
| turned into the defacto retirement plan for Americans.
|
| https://en.wikipedia.org/wiki/401(k)#History
| bradleyjg wrote:
| Social security and Medicare are supposed to provide a
| floor and prevent elderly poverty. We've gotten much much
| richer (which somehow previous generations never get any
| credit for) and so that floor seems a lot lower than it
| used to.
|
| Beyond keeping the elderly out of poverty I'm not sure
| there's a problem to solve. If people would rather drive a
| BMW in their 30s than play golf in their 70s who am I to
| tell them they are wrong?
| afpx wrote:
| 401ks are great.
|
| I started maxing out my 401k account 25 years ago, back when
| I was only 22 and making $30,000 / year.
|
| At the time, financially it was a little rough. My wife
| wasn't working, and I had a ton of debt from school. But, I
| figured it would be easier to do it then, while I was able
| and we didn't have kids.
|
| I doubled down on compound interest and the future growth of
| the global economy. I invested it all in S&P 500. There were
| several significant down turns. But, eventually the
| investments started working for me instead of being a sink.
| Now, on average, I gain about double my salary in investment
| returns, per year.
|
| So, I totally recommend 401ks highly for people under 25.
|
| However, there are certainly sketchy companies out there
| offering plans. So, it's wise to compare a fund's fees and
| expense ratios to ones like Vanguard admiral funds.
|
| Also, I do understand that the major benefits of 401ks go to
| those in higher tax brackets, but still - it's a solid way to
| automatically pay one's future self first.
| koolba wrote:
| The problem with pensions is that nobody wants to actually
| pay for them. It's a great concept, but nearly impossible to
| keep financially solvent without growth of the payor base.
|
| Defined contribution plans cannot be fudged with accounting
| rules or unsustainable growth rates. By definition the money
| is paid as its accrued.
|
| If people want a defined benefit plan then the market should
| provide one they can purchase outside of their job. It's not
| rocket science to do the math involved for growth vs payout
| vs life expectancy. The problem is that the math doesn't add
| up so nobody would buy it.
| toomuchtodo wrote:
| > The problem with pensions is that nobody wants to
| actually pay for them. It's a great concept, but nearly
| impossible to keep financially solvent without growth of
| the payor base.
|
| You mean companies don't want to pay for them, and instead
| offer pathetic 401k matching as a compromise. That is the
| key point: the shift from defined benefit to defined
| contribution was done to shift profits away from workers.
| Very similar to college costs going up when public funding
| for education institutions decreased.
|
| https://crr.bc.edu/working-papers/the-outlook-for-pension-
| co...
|
| > This paper addresses the relationship between defined
| benefit pension plans and corporate profits and examines
| the outlook for defined benefit plans in the wake of the
| bear market. Due to a soaring stock market during the
| extended bull market of 1982-2000, together with federal
| regulations and legislation that shifted funding
| requirements forward, pension contributions virtually
| disappeared as a corporate expense for much of the previous
| two decades.
|
| > Our analysis suggests that in the absence of the stock
| market boom and the regulatory and legislative changes that
| reduced funding, the average firm's contribution to its
| pension plan would have been 50 percent higher during the
| 1982-2001 period - 9.9 percent of payroll instead of 6.6
| percent of payroll. The downturn in contributions had a
| significant impact on corporate profits. Lower pension
| contributions, all else equal, will produce a dollar-for-
| dollar increase in before-tax profits. Our analysis implies
| that corporate profits were roughly 5 percent higher than
| they would have been otherwise. Higher profits produce a
| feedback effect as they lead to further capital gains and
| further reductions in contributions.
|
| Excessively generous pensions or those assuming unrealistic
| market returns are a different issue. Pensions can be
| sustainable when properly implemented and governed.
|
| High level, the past strip mined the future, and the bill
| is coming due.
| PragmaticPulp wrote:
| > You mean companies don't want to pay for them
|
| Not just that, but most employees would choose higher
| paychecks and a 401K option over a company that offered
| lower paychecks but a substantial pension, even if the
| net compensation was equivalent.
|
| Pensions become increasingly less attractive as young
| people recognize that changing jobs every several years
| is a quicker route to financial career growth than
| parking long-term at one company with a pension.
|
| I was once acquired into a company that offered the worst
| benefits I had ever seen (zero insurance contribution,
| zero 401K match, basically just paychecks and nothing
| more). I thought it would be a death sentence for
| recruiting, but it turned out most younger candidates
| just don't care at all about anything other than their
| salary number. We lost a lot of people as they grew older
| and had families, but younger people didn't bat an eye at
| the near complete lack of benefits. We could win a lot of
| hiring battles by simply offering the higher bottom-line
| salary number since we had such little overhead. (I left
| quickly for a better company)
| toomuchtodo wrote:
| It works in the aggregate in a tragedy of the commons
| sort of way, but social security taxes will just keep
| ratcheting up so everyone who didn't save enough get a
| basic level of retirement (old people vote reliably, and
| there are a lot of poor old people on the horizon),
| probably with means testing starting in 10-15 years. I
| suppose that's the best we can hope for considering
| humans and their terrible risk management and long term
| decisioning ability, and there's clearly enough wealth
| and productivity for government to sink its teeth into.
| If the private sector couldn't do it with 401ks or
| pensions on the front end, government can do transfer
| payments (social security) and taxes on the backend.
| koolba wrote:
| > High level, the past strip mined the future, and the
| bill is coming due.
|
| I have no issue with private pensions. If employers want
| to offer them and employees accept them, have at it.
| Don't look to me to find the difference when the numbers
| don't add up.
|
| Public pensions are a disaster though. The people making
| the promises don't care about being fiscally solvent.
| They just want to buy votes using your grandchildren's
| tax dollars as a credit card.
|
| The earning class will eventually vote with their feet
| and those municipalities will either force a haircut on
| the pensioners or beg for a Federal bail out.
| [deleted]
| bradleyjg wrote:
| The market does provide it, it's called a deferred annuity.
| If you find the pricing disappointing, well then you see
| the issue with pensions.
| koolba wrote:
| That's precisely my point. People don't want to pay the
| true cost of taking on a 40 years deferred annuity.
| cortesoft wrote:
| > and try to save a good 1/3 of your income for the future.
|
| But that is what pensions ARE. The people who got them took
| less money up front because part of their compensation was a
| defined benefit pension. They WERE saving money by deferring
| payment.
|
| How is this any different than your 401k suddenly saying
| "sorry, when we said we were investing in the stock market with
| your money we actually used it on other stuff, so now your
| retirement account doesn't have any money"?
|
| Would your response be to tell the people who were investing
| their retirement in the 401k, "well you should have saved money
| for retirement"
|
| They were trying to save money for retirement! They saved money
| they were making now to be used later. Are you suggesting
| people should only save by stuffing money in their mattress?
| throw0101a wrote:
| > _Is it really as political as that as in "the big bad
| republicans ate my pension"?_
|
| Which party / ideology is trying to get rid of the public
| Social Security in the US?
|
| *
| https://en.wikipedia.org/wiki/Social_Security_debate_in_the_...
|
| Do you think it's a coincidence that wealth and income
| inequality in the US as exploded since 1980, the year that
| Reagan got elected? (Though the Democrats in Congress have been
| complicit.)
|
| The American oligarchs have put on a concerted effort since the
| 1970s, and they've largely been succeeded. Good history of the
| subject published in 2020:
|
| *
| https://en.wikipedia.org/wiki/Evil_Geniuses:_The_Unmaking_of...
| papito wrote:
| I really don't understand what people think when they choose to
| ignore retirement contributions. What do they think is going to
| happen when they get old? Seriously, _what_ to they expect to
| happen? A Government man showing up at their doorstep with a fat
| suitcase filled with dollars?
|
| Also, IRA, SHMAYARAY. Max out your Roth every year, and then do
| whatever. I don't see how the taxes for the rest of us are going
| to go down with the aging population.
| ralph84 wrote:
| I think you're a tad too optimistic congress won't find ways to
| tax Roth distributions. It's easy to imagine a future with a
| higher age for qualified distributions and/or distributions
| over $x or from an account with a balance over $y being
| classified as non-qualified. $x and $y will of course be chosen
| to appear to target the "rich", while mostly hitting the middle
| and upper middle class, just like AMT, the SALT deduction cap,
| and other "tax reforms".
| xf1cf wrote:
| You're missing the point of the pension and social security.
| There are, and has always, been a large portion of society
| making "just enough". Maxing out your 401k requires 19,500
| dollars of pre-tax income you can dump into an account you
| can't touch. A little less with a match.
|
| So do the math:
|
| Median income in 2019: $65,712.
|
| $19,500 is almost 30% of your pre-tax income. Not a whole lot
| left to save for a house, buy a (old, used) car, or any number
| of other things. I say pre-tax because the situation is even
| more bleak if you look at roth post-tax.
|
| After contributing to your 401k as above your remaining take
| home after taxes (assuming you do not pay state taxes) is
| $23635.
|
| So you max out your IRA at $6,000.
|
| Now you have $17,635 to live on. Almost nothing. Maybe in the
| 90s this would've worked but even in my low CoL town renting an
| apartment will still run you $1,100 for a single room 600
| square foot shack. You could do it, but you would be living on
| ramen and beans towards the end of the year assuming there
| weren't any medical emergencies, car problems, or any number of
| other things that could effect you (rising food costs, gas
| prices, electrical costs in summer, etc).
|
| The purpose of a pension is that it provides a simple, easy,
| and guaranteed retirement plan for people in this situation.
| They can't afford to utilize their 401k for maximum benefit,
| and they can't afford to utilize an IRA to it's maximum
| benefit. 401ks were one of the greatest magic tricks ever
| pulled on Americans. While I agree they're great if you have
| the extra income, they do a lot of damage to the retirements of
| people who cannot afford them.
| gizmo686 wrote:
| Relying on pensions is not ignoring retirement. It is assuming
| that you will receive the benefit you were promised as part of
| your compensation. Not getting your promised pension is the
| same as your 401k balance being confiscated by your broker to
| cover for their own financial shortfall.
|
| The main difference is that the 401k is a much more transparent
| product, so this outright theft is not as possible. The flip
| side of that is that your exposure to the market is more direct
| (which may not be that much of a flipside, as pension funds are
| still exposed to the market, but that exposure is more
| obscured).
|
| > I don't see how the taxes for the rest of us are going to go
| down with the aging population.
|
| Who says taxes are going to go down? Reading the political
| winds, the grass roots support for raising taxes is the highest
| I have ever seen it, and seems to be growing. We are leaving
| the political era of low taxes independent of the actual fiscal
| need to raise them.
| bradleyjg wrote:
| Employers going bankrupt was always a risk. Why didn't their
| elected collective bargaining representatives negotiate for
| an independently administered, fully funded, bankruptcy
| remote pension investment vehicle?
| cortesoft wrote:
| That is not what this article is about. These people took jobs
| that HAD defined pension plans. They took the jobs based on
| those promised pensions, and planned their savings around the
| amounts promised.
|
| Then, the pensions went bankrupt and failed to pay what they
| promised.
|
| This is not people failing to plan for the future. This is
| people having what is promised them revoked.
| drdec wrote:
| Given that the current government bailed out private pension
| plans to the tune of $86 billion dollars as part of the latest
| COVID-19 relief bill [1], I am not concerned that they will soon
| tackle the government pension funds which have also have
| shortfalls.
|
| According to the article, the private pension bailout was "paid
| for" by ending the enhanced unemployment program in August
| instead of September. Of course, you don't pay for new spending
| by "cutting" other new spending.
|
| [1] https://www.forbes.com/sites/ebauer/2021/03/10/the-covid-
| rel...
| bradleyjg wrote:
| Note that the bailout came with absolutely no strings attached.
| Apparently nothing went wrong that caused an $86 billion
| shortfall so no changes need to be made going forward.
| bradleyjg wrote:
| Everyone wants a bailout. The multiemployer pensions got one in
| the third Great Covid Helicopter Drop. But what confidence do we
| have that we won't be exactly in the same spot a couple of
| decades?
|
| Mayor Kilpatrick signed a terrible deal and separately (?) was
| corrupt and went to prison. Have the voters learned anything?
| Have their voting patterns notably changed since then?
|
| What about the union representatives elected by the Detroit
| municipal workers? Don't they bear some culpability? Have there
| been a seismic shift there, or are the same old cronies still
| passing off power one to another?
| wcunning wrote:
| On the same vein -- look at how many Big Three UAW senior
| people have been indicted on corruption charges just in the
| last 5 years... I haven't kept up with all of it but the number
| is at least in the tens from Chrysler UAW alone.
| ArkanExplorer wrote:
| Providing retirees with cash, which they then use to
| independently procure good and services across millions of
| individuals, is fundamentally inefficient.
|
| Instead, we should treat each retiree as a ward of the state, and
| provide them with Government housing, cell phone and plan, food
| (cooked or ingredients), and a limited amount of
| electricity/water - plus a small stipend for private purchases.
|
| The other fault of the current system is that we link retirement
| to age - instead, it should be linked to health: if you can
| continue working, you should be expected to do so.
|
| With the savings, we can eliminate regressive taxes like sales
| taxes (or just enable the currently totally unsustainable system
| to keep functioning.)
| chrisseaton wrote:
| I don't think many people in the US look forward to spending
| their last years with 'a limited amount of electricity/water'.
| gruez wrote:
| Can't you replace "retiree" with citizen/employee and use the
| same argument to advocate for a planned economy and/or company
| towns? ie.
|
| "Providing citizens with cash, which they then use to
| independently procure good and services across millions of
| individuals, is fundamentally inefficient.
|
| Instead, we should treat each citizen as a ward of the state,
| and provide them with Government housing, cell phone and plan,
| food (cooked or ingredients), and a limited amount of
| electricity/water - plus a small stipend for private
| purchases."
| tuxinator wrote:
| If you can continue working you should be expected to do so?
| That sounds dystopian honestly.... that's not the future we
| should be striving to build.
| thrill wrote:
| Just like your healthcare, if laws and incentives affecting your
| retirement are dependent on someone's else's decisions about
| where to allocate and how much of the resources you worked so
| hard to obtain, then you're living under an illusion of
| independency.
| greyface- wrote:
| https://archive.is/B7Mgq
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