Your pension could be at the center of America's next financial crisis

[UnrealizedPotential]

All anyone can do is guess because no one has enough information to accurately predict the outcome. All right , I will guess. I would say the effect on the stock market will be minimal. Everyone knows the pension shortfall in this country. It is not a secret, nor is it new. It's been playing out for years.

So a lot of the bad news has already been baked into company results and public opinion. The end result has been and will continue to be that companies and state governments will continue to slash and terminate pensions where they can. Workers will have to be more responsible about their own retirement and will have to work longer. Gone are the days of good pensions.

It's always been tough I would imagine to fund retirement. The way I see it there are only two possibilities going forward: Either one will save and invest for retirement or one will have to work until they just can't anymore. I think that's the way it was before the unions and pensions came along.

 

[harley]

I've said in a number of SS threads that I never counted SS in my FIRE calculations, because it isn't money that was in my control. I guess I'm just a naturally suspicious/distrustful of authority type of guy, because I always felt that way about pensions too. When I went to work in megacorp in the early 80s we had what was considered an excellent pension plan. I made a conscious effort to ignore it's existence, and saved and invested on my own to the greatest extent I was able. I completely ignored the pension balance in any of my FI calculations, because I didn't trust mega to follow through. And even if they did, I had watched the retiree health benefits get cut significantly over the decades, so why not the pension.

I was right, sort of. By the time I took a package and retired, MC had frozen the pension plan, and it wasn't offered to new employees. I had the option to take mine as an annuity or a lump sum. I chose the lump sum because I still didn't/don't trust them to pay off over time.

It's nice that both the pension and SS are there to some extent when I got/get to that point. But I didn't need them to FIRE, and don't need them moving forward. They'll both just allow me to leave more to DD and DGDs eventually.

I guess I'm saying that I feel bad for all thoe people who depended on their pension for their retirement security. Still, I feel like they could have done a lot to mitigate their situation by trying to maximize the parts they had control over. I've had many "promises" made to me over the years that were jerked away or denied later to trust anyone completely, especially with something as important as my family's financial security. To paraphrase a dead guy, "Trust but cover your own a**".

 

[pb4uski]

Let's abolish insurance as well, then. Because the premise is the same. Collect premiums (contributions) from a large group of people in an amount sufficient that when invested, the investments cover the payouts and pay a return if the plan is supposed to generate one. ....

Perhaps the premise is similar but the results are totally different because regulation is totally different. Also, the insurer is on the hook as long as they have financial resources so if they screw up pricing a particular product then profits from other products help out. Also, insurance regulators monitor regularly and step in and force remedial actions or takeover an insurer long before its liabilities exceed its assets. Very few insurers have failed since improved supervision was put in place in the early 1990s and in most cases those that did we just taken over by healthy insurers who wanted to expand their business. Also, where the worst happens, then all other insureds in that state help provide relief through state guaranty fund assessments.... no taxpayer funds needed.

The main problem with pensions is poor regulation and supervision.

 

[Another Reader]

Perhaps the premise is similar but the results are totally different because regulation is totally different. Also, the insurer is on the hook as long as they have financial resources so if they screw up pricing a particular product then profits from other products help out. Also, insurance regulators monitor regularly and step in and force remedial actions or takeover an insurer long before its liabilities exceed its assets. Very few insurers have failed since improved supervision was put in place in the early 1990s and in most cases those that did we just taken over by healthy insurers who wanted to expand their business. Also, where the worst happens, then all other insureds in that state help provide relief through state guaranty fund assessments.... no taxpayer funds needed.

The main problem with pensions is poor regulation and supervision.

The federal government has a reasonable public interest in regulating and supervising pension plans, whether private or state and local government. As much as I hate the idea of meddling, it's the correct response.

 

[audreyh1]

The solution is simple. Abolish pensions completely. You simply cannot have a system where people are "promised" some "defined benefit" regardless of contributions made, or investment returns. The financial burden ends up falling on people who have nothing to do with the pension, but have to suffer the consequences of "promises" made decades ago. This does real and significant damage to the surrounding economies. It's totally unfair. The article linked in the OP gets it exactly backwards. The damage does not come from pensions collapsing. The damage comes from propping them up.

43210 - Where did you come from, and why are you posting here?

You didn't introduce yourself and your retire early aspirations on the "Hi I am" forum.

This thread was last active over two months ago. You bring it up to the forefront today - why?

 

[Chuckanut]

The solution is simple. Abolish pensions completely. You simply cannot have a system where people are "promised" some "defined benefit" regardless of contributions made, or investment returns.

One comment: It's a ...........

 

[haha]

In the federal governments case, money can be printed for the PGFC, SS or the many Federal pensions. In the States case, it is more difficult.

The real problem is that younger people do not have the higher paying jobs to continually fund the pension for the older workers. And the younger ones do not want to work...

It is not true that young people do not want to work. It is just that they don't much care to work to support a bunch of retirees that are not their family members, who have been "promised" payments that create a lifestyle far in excess of what most of these younger workers will ever see. These "promises" have largely been obtained in the public sector through collusion between public sector unions and politicians who understand the principle of mutual back scratching. As they say, socialism is great until you run out of other people's money.

Ha

 

[43210]

43210 - Where did you come from, and why are you posting here?

You didn't introduce yourself and your retire early aspirations on the "Hi I am" forum.

This thread was last active over two months ago. You bring it up to the forefront today - why?

I'll plan to do a "How am I doing" thread some time.

I was participating in the very active new tax bill thread (which seems to have disappeared) in this "FIRE Related Public Policy" sub-forum, and noticed this pension thread right near the top of the "FIRE Related Public Policy" thread list, so I assumed it was active/recent, but now I see the dates. Do you see what happened now?

 

[43210]

It is not true that young people do not want to work. It is just that they don't much care to work to support a bunch of retirees that are not their family members, who have been "promised" payments that create a lifestyle far in excess of what most of these younger workers will ever see. These "promises" have largely been obtained in the public sector through collusion between public sector unions and politicians who understand the principle of mutual back scratching. As they say, socialism is great until you run out of other people's money.

Right. And I'm sick and tired of being "other people's money". Subsidizing a pension I am not part of has definitely cost me six figures.

 

[MichaelB]