HomeLatest ThreadsGreatest ThreadsForums & GroupsMy SubscriptionsMy Posts
DU Home » Latest Threads » Forums & Groups » Main » General Discussion (Forum) » Let me explain to you wha...
Introducing Discussionist: A new forum by the creators of DU

Sat Feb 23, 2013, 05:53 PM

Let me explain to you what happened to pensions

A couple of days ago I was chatting with an old friend who's husband has just retired and we got around to pensions and IRAs and 401Ks. Things have changed, I told her, and she certainly understood that, but we are both of an age that saw the last of decent retirement systems. She simply did not understand just what had happened to us all but she clearly understood that younger folks than ourselves do not have nearly the retirement security that she and her's and me and mine share.

So I explained to her what happened and it a near miracle to see her eyes just open up. She got it, she finally understood what happened to us and how we got shafted again. My explanation was really very basic, very simple. I thought I'd repeat it here just for general discussion.

Here goes. The first thing that has to be understood is that no business on earth earns money simply because it has a name and it exists. Nope, the earnings of businesses comes directly from the labor of their employees. It is the people, every single individual who works there, who, in the name of the company, by producing goods or providing services or accomplishing the myriad of administrative tasks required to support the endeavor who earn the money. Back when pensions were the norm a part of the money that each employee earned was put into a pension account for that employee, which accumulated over the years and would eventually be converted into an annuity or possibly a formula was applied to the employee's employment history and a monthly check resulted. So a small amount of each employee's earnings was retained and were invested in the employee's name and returned to him or her later in the form of the monthly check.

But then we got the 401k, a fund into which the employee paid directly. And how is that different? Well, the employee is still doing the same work as before but now instead of that part of his or her compensation that used to to into is pension fund being his money we find it is being retained by the employer as profit. This means the employee is left to go out and buy his or her own retirement with the pay they do manage to get. So basically the employee's earnings have been directly transferred to the stockholder's of the company. And the 401k itself? You might just as well play roulette for as well as most of them perform, with many of them not even beating inflation.

And that is basically it. Another transfer of wealth from the working person to the master's of the universe. What this nation needs is not a consumer protection Agency, it needs a worker protection Agency, and DOL or DOJ certainly do not fill the bill.

79 replies, 7666 views

Reply to this thread

Back to top Alert abuse

Always highlight: 10 newest replies | Replies posted after I mark a forum
Replies to this discussion thread
Arrow 79 replies Author Time Post
Reply Let me explain to you what happened to pensions (Original post)
1-Old-Man Feb 2013 OP
Hassin Bin Sober Feb 2013 #1
hedgehog Feb 2013 #2
rgbecker Feb 2013 #5
OKNancy Feb 2013 #13
doc03 Feb 2013 #29
brush Feb 2013 #48
doc03 Feb 2013 #56
dixiegrrrrl Feb 2013 #11
hedgehog Feb 2013 #37
dixiegrrrrl Feb 2013 #49
Sekhmets Daughter Feb 2013 #3
southernyankeebelle Feb 2013 #4
Curmudgeoness Feb 2013 #19
southernyankeebelle Feb 2013 #26
mountain grammy Feb 2013 #30
Curmudgeoness Feb 2013 #57
jumptheshadow Feb 2013 #6
tblue Feb 2013 #8
xtraxritical Feb 2013 #18
HiPointDem Feb 2013 #35
jeff47 Feb 2013 #53
tblue Feb 2013 #7
FarCenter Feb 2013 #9
1-Old-Man Feb 2013 #10
SheilaT Feb 2013 #20
upaloopa Feb 2013 #12
secondvariety Feb 2013 #36
trekbiker Feb 2013 #64
lonestarnot Feb 2013 #14
pansypoo53219 Feb 2013 #15
socialindependocrat Feb 2013 #16
gadjitfreek Feb 2013 #17
OutNow Feb 2013 #21
jtuck004 Feb 2013 #38
love_katz Feb 2013 #68
CarmanK Feb 2013 #22
Curmudgeoness Feb 2013 #23
adieu Feb 2013 #24
annabanana Feb 2013 #25
patrice Feb 2013 #27
snappyturtle Feb 2013 #28
reformist2 Feb 2013 #31
antigop Feb 2013 #71
reformist2 Feb 2013 #77
antigop Feb 2013 #78
maggiesfarmer Feb 2013 #32
jtuck004 Feb 2013 #40
laundry_queen Feb 2013 #46
uponit7771 Feb 2013 #33
midnight Feb 2013 #34
jtuck004 Feb 2013 #39
Nye Bevan Feb 2013 #41
obxhead Feb 2013 #42
leveymg Feb 2013 #43
JeffHead Feb 2013 #44
grantcart Feb 2013 #45
antigop Feb 2013 #50
grantcart Feb 2013 #61
antigop Feb 2013 #69
jeff47 Feb 2013 #54
grantcart Feb 2013 #58
antigop Feb 2013 #70
jeff47 Feb 2013 #79
Gidney N Cloyd Feb 2013 #60
grantcart Feb 2013 #62
Purplehazed Feb 2013 #47
antigop Feb 2013 #51
antigop Feb 2013 #52
on point Feb 2013 #55
1-Old-Man Feb 2013 #75
CrispyQ Feb 2013 #59
Cary Feb 2013 #63
alfredo Feb 2013 #65
Sherman A1 Feb 2013 #66
Hiski Feb 2013 #67
SmileyRose Feb 2013 #72
Mickey Disme Feb 2013 #73
WillyT Feb 2013 #74
Mickey Disme Feb 2013 #76

Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 05:55 PM

1. Kicking for later

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 06:01 PM

2. I would love to see a two tier Social security system -

one a basement guaranteed income for every worker, plus an annuity that you could invest up to a certain amount each year.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to hedgehog (Reply #2)

Sat Feb 23, 2013, 06:07 PM

5. You got it already. It's called an IRA.

You can invest around $2000/year however you like...even deduct it from your taxes. Have Fun and Good Luck.

As for Social Security, leave it the fuck alone....its meager enough as it is.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to rgbecker (Reply #5)

Sat Feb 23, 2013, 07:12 PM

13. It's gone up to $5500 a year; $6500 if you are over 50

Reply to this post

Back to top Alert abuse Link here Permalink


Response to rgbecker (Reply #5)

Sat Feb 23, 2013, 09:00 PM

29. There is also the 401k and most employers match a certain percentage of it. n/t

Reply to this post

Back to top Alert abuse Link here Permalink


Response to doc03 (Reply #29)

Sun Feb 24, 2013, 11:21 AM

48. Exactly

The OP leaves some things out. There are options for what the employee does with the 401k money. It doesn't have to go to company stock. There are usually money market fund options, bond funds, other stock funds etc. The big change was that the employee suddenly had to be pro-active in making investment decisions whereas before with the traditional pension, he/she didn't have to worry about whether the retirement money was invested well. It was guaranteed. It's not like you don't get anything on retirement as this sentence from the OP implies:

"This means the employee is left to go out and buy his or her own retirement with the pay they do manage to get."

It's certainly a different world with retirement money pegged to the ups and downs of the stock market. There's much more risk. Employees now have to do some serious research in making the right decisions as to which options to choose, and the decisions have to be revisited from time to time to move money from say a hi-yield stock fund to maybe a money market fund when things look bad, like in '08 when BushCo was wrecking the economy and we had to bail out the banks.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to brush (Reply #48)

Sun Feb 24, 2013, 01:27 PM

56. I put my 401k into T.Rowe Price Retirement 2010 Fund and it has done

good for me. When I retired in 2010 I rolled it over into an IRA in the same fund. As you get older it gradually puts more money into
fixed incme.Now I had friends that jumped out of the market at its bottom and never recovered. Most of those people will get back in now when
the market is high and lose their ass again. Some people just shouldn't try to invest.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to hedgehog (Reply #2)

Sat Feb 23, 2013, 06:32 PM

11. My job had a 403-B retirement plan that was an annuity...with AIG!

Non profit workplace, so their 401 was called a 403...employer and employee contributed into an annuity, which could not be touched for 8 years, it paid 4.25% annualy.
Once I quit that job, it was left to just grow on the interest.

Luckily, I was able to cash it in 6 months before AIG went down the tubes.



Reply to this post

Back to top Alert abuse Link here Permalink


Response to dixiegrrrrl (Reply #11)

Sun Feb 24, 2013, 08:17 AM

37. Your experience shows what is wrong with the 401K program -

the employee puts up the money, but the employer selects the outfit that does the investing! We're lucky - we're with an outfit that looks at the long term.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to hedgehog (Reply #37)

Sun Feb 24, 2013, 11:44 AM

49. Yes, you are correct.

I remember when the company decided to do it, and sure enough, it was a plan sold to the company by a local insurance agent, who of course made a commission.
and of course when I left the job, I could not take the money and re-invest it.

Have to laugh, tho, at the interest rate of 4%, which would look pretty good right now.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 06:01 PM

3. Excellent explanation!

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 06:01 PM

4. Thank you for putting it simply. What are people to do with the retirement money. Where

 

should they put it. Most people don't understand how to invest properly. That is why I think no matter what social security is always there. Remember that crash we people who had social security didn't get hurt. I know my own son doesn't know how to invest. I told him no matter what keep your money with social security .

Reply to this post

Back to top Alert abuse Link here Permalink


Response to southernyankeebelle (Reply #4)

Sat Feb 23, 2013, 07:39 PM

19. Not just most of us ordinary people who don't know how to invest properly.

Think of all the high-paid jackasses on Wall Street and managing these funds who got smacked. They don't know what they are doing either, at least on the highest levels.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to Curmudgeoness (Reply #19)

Sat Feb 23, 2013, 08:26 PM

26. That's the truth. It scares me for my son and his child for the future. I'm old now but

 

I fear more for them because they are young. What is it going to be like for them in the future. Not everyone is made to go to college or smart enough. What about people like that. They go to work everyday and work hard and barely make over the minimum wage. I worry about people like that. Our politicans could care less about them.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to Curmudgeoness (Reply #19)

Sat Feb 23, 2013, 10:06 PM

30. My father in law took $300,000 in 1990 and tripled it before he died last year

He had a friend who taught him about municipal bonds, and together they started investing. Earnings from muni bonds are tax exempt, but the yields are usually modest. But, if you spend most of your waking hours studying municipal bond funds, you can do pretty well. Also, municipal bonds are sold for the benefit of the public, from schools to sewers, you are loaning money to municipalities to improve their infrastructure. Kind of that public/private partnership that can work so well.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to mountain grammy (Reply #30)

Sun Feb 24, 2013, 01:49 PM

57. If you spend most of your waking hours studying

anything, I am sure that you can get very good at it. But seriously, we are talking here about 401(k) funds, which means that we are spending most of our waking hours at work. We cannot all become investment gurus. And that is the problem. We need to focus on our jobs, not on becoming investment experts. That is the rub.

I also have had munis most of on life. There is no way that investing only in municipal bonds that you can triple your money in 20 years. At least, no way that I can determine. I hope that your father in law transferred his strategy to you, so that you can do better than just plodding along. And in today's environment, I am not sure how comfortable I am with munis, since so many cities have gone or are on the verge of going bankrupt. This is a difficult investment environment all the way around---stock, bonds, interest rates.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 06:11 PM

6. I pay a fee every two weeks for adding money to my 401K

It's not what I would consider an unsubstantial fee, either. It costs me money 26 times a year to send a financial company a decent portion of my paycheck.

I hope younger people realize that they need to support unionization. Bringing organized labor back to its feet is key to gaining the leverage required to give younger generations the ability to retire without impoverishment.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to jumptheshadow (Reply #6)

Sat Feb 23, 2013, 06:16 PM

8. Citibank started charging me $50 a year

for holding my money for me. I asked about it and try said, "It's not us charging it. It's the broker something or other." Riiiight.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to tblue (Reply #8)

Sat Feb 23, 2013, 07:34 PM

18. I switched to a small local bank thats been in town a very long time. No BS, great people.

 

Credit unions are another great way to go. Charles Schwab brokerage accounts allow you to invest in anything you want, have checking and savings (debit/credit card too) and best of all, Schwab covers any ATM fees from anywhere. F the too big to jail banks.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to jumptheshadow (Reply #6)

Sun Feb 24, 2013, 01:20 AM

35. why not reduce the # of deposits & pay fewer fees?

 

Reply to this post

Back to top Alert abuse Link here Permalink


Response to HiPointDem (Reply #35)

Sun Feb 24, 2013, 12:42 PM

53. Because it's a 401k, not an IRA.

The money is taken from each paycheck. There is no way to reduce the number of deposits without reducing the number of paychecks.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 06:13 PM

7. If not for my dad's 2 pensions

(US Army and state employee) I would be financially responsible for my mother, and I am barely employed. My dad earned that, dammit, as did so many workers who paid in to their pension plans, some of which have been raided/stolen. And I do have a 401k that bobs up and down based on how it's investments are doing, but so far it's still in tact. There was no such thing as a pension where I worked (Apple!).

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 06:17 PM

9. Company pension funds were not associated with specific employees

If you lost the job or left the company before the pension was vested (15 years was typical) you had no pension benefit.

Corporate contributions were put into funds which were managed in bulk by Wall Street firms or by insurance companies. They would be put into a mix of stocks, bonds, real estates, annuities, and other institutional investment vehicles.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to FarCenter (Reply #9)

Sat Feb 23, 2013, 06:26 PM

10. Depends, there were many ways they were calculated and vesting sometimes came very early

The last place I worked at that had a pension fund vested at 1 year, and another place I worked at simply used an employment history formula to determine the amount, but no matter how calculated or where invested the point is that it was entirely funded by money earned by the employee, temporarily retained by the employer (via all the ways you mention (stocks, bonds, and so forth) and eventually retuned to the retired employee. Those earnings - money earned by each individual employee - are still being collected by the companies, the employees certainly got no raise the day their pensions disappeared - are now simply another bit of profit on the bottom line.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to FarCenter (Reply #9)

Sat Feb 23, 2013, 07:39 PM

20. This is important, and something that isn't well understood these days.

It was also very common that you could not be contributing to the company pension plan unless you were a certain minimum age, often 25, and had already worked for the company for a certain time, perhaps two years. The long vesting time is also important, because the vast majority of employees would never work long enough to be vested, so the money the company was putting into the plan benefitted from that.

I went to work at the age of 20 in a company with just that sort of pension. Two years, age 25. To a 20 year old the prospect of contributing to a pension that I would eventually collect 45 years down the road was totally unfathomable. That was in 1969. Well, a year or so later a change was made, and all employees were automatically in the pension program, although the vesting time would have been at least ten years. Again, it was meaningless to me at that age. Well, I wound up working there for 10 years, and while I've been letting the very small pension I'm entitled to just sit out there so it will grow, I do have an old-fashioned defined-benefit pension coming to me.

At least in the company I worked for, there was no direct payroll deduction. The company put aside whatever the money was. Some years after I left the pension was phased out and a 401k was put in place in stead.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 06:39 PM

12. I work for a county government and still have a defined

benefit plan. We had to go to a two tiered system this year. New employees get a reduced benefit. We still have a union. We have what most everyone had before the Reagan years.
We need to organize labor again rather than fight among ourselves.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to upaloopa (Reply #12)

Sun Feb 24, 2013, 07:18 AM

36. Same here.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to upaloopa (Reply #12)

Sun Feb 24, 2013, 03:13 PM

64. same thing has happened to my company

I'm a union engineer for a major utility. Starting this year new employees do not get a defined benefit pension, they get a cash balance pension which is about half the total lifetime benefit as a defined benefit pension. It was tough negotiations but the company succeeded by guaranteeing existing employees would keep thier defined benefit pension and for new employees they upped the company match on the 401K a little. So we voted and it passed, basically we screwed over the future employees in our own self interest. This is happening to even the most conservative old blue chip companies. Managements all over are getting very clever and there is a definate financial incentive for senior management to raid the pension funds in this manner.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 07:14 PM

14. I could have saved you all that trouble in three words.

They stole them.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 07:15 PM

15. 401k are purely a wall street protection scam. WHICH has been turned into a fucking casino.

the house ALWAYS wins.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 07:20 PM

16. The danger of the 401K

When we had a non-contributory pension from the company they will pay you your pension
for as long as you live.

With the 401K you save a finite amount of money and you need to divide it up
by calculating how long or guessing how long you will live.

If you save $500K (a half a million!)
and you take $25K a year for retirement (a little over $2K per month)
you will have roughly 20 years before your money runs out.
If you retire at 60 you will be 80 when you go broke.
So take a little less and stretch your funds.

The problem is that there are people who will want to live on $50K per year
and then when they run out of money they will go, pleading, to the government
saying that they can't be allowed to starve to death.

The government needs to realize this and prepare for the inevitable flood of
morons who will try to pull this scam!

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 07:32 PM

17. Thank goodness for the New York State Teachers' Retirement System

The best funded pension system in the country. 8 more years of teaching and I can retire for 63% of my final 3-year average salary and not pay New York State tax or FICA. I knew this when I got into teaching but it's not why I got into teaching...I love to teach and I'm damned good at it. I wish every employee out there got the same chance at a good pension and health care and it's criminal that people don't.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 07:48 PM

21. You forget an important point

About one hundred years ago, workers in Europe began electing socialists and labor candidates to office. Worker's power was on the upswing. There was a great debate / divide between the revolutionists and the evolutionists. While they all agreed that a company's profit was produced by its workers, some sought to take the companies from the capitalists and run them to benefit the workers. Others believed they could strike a bargain with the owners and get a better life for workers without causing a revolution. They believed that the owners could keep control of the business, but would offer job security, retirement benefits (pension), and health care insurance. The owners, who saw what happened to their kind in Russia in 1917, agreed to this bargain.

This also happened in the USA, but instead of having our own party of workers, we usually allied with the Democratic Party for elections and developed strong unions.

There were two bad assumptions built into the grand bargain however. First, by letting the owners keep control of production, we allowed them to shut down a company in the USA and open one in India or China with almost no restrictions. With the company closure all the promises for retirement, health care, etc. disappeared. Second, as unions lost their fighting edge they began to accept benefits to be paid in the future rather than a higher percentage of the profits / higher wages in the present. The owners knew that the more they could defer worker's claim to company assets the longer they could keep them for themselves. And then when the accrued benefits came due (as we might have guessed) the owners (the 1%) changed the laws and / or went out of business leaving the entire country of workers holding an empty bag.

There are two important lessons here. 1. We should have taken the means of production when we had the opportunity a hundred years ago. 2. When forced to negotiate with the owners we should never accept promises for the future rather than money and power up front.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to OutNow (Reply #21)

Sun Feb 24, 2013, 08:33 AM

38. >There are two important lessons here< Leaving slavery and that labor issue out of the discussion,

from about 1865 the government and business worked together to kill off attempts at "having the opportunity" to take the means of production by murdering, imprisoning, and dis-empowering workers. Government troops rode along with Carnegie's hired thugs in rail cars that were shooting into miner's camps where men, women and children were killed, some burned to death. People were put in stockades in cities like Coeur d'Alene, ID, outside in the cold with no water, shelter, or toilets. When, say, a wife would show up with food or blankets, the police or guards would violate her in in full view of the captives. Spokane had a whole street full of business that would sell the same job in the forests to more than one person, or they would work for a day or two and be fired so more fees could be charged, and when the IWW objected they were thrown into Spokane jails and alternately had steam poured in on them and then left to freeze, (several died in custody) while the police were running a prostitution ring out of the women's side. Peaceful Haymarket protesters were attacked for two days straight by police, until a bomb was thrown from a window, at which point the police began to shoot everyone, perhaps even some of their own. People were hung that had nothing to do with the violence. By 1920 the bumbling communists were being blamed for labor's struggles, (even though they really sucked at understanding the culture they were trying to organize in) and the Red Scare which followed went on for decades, affecting virtually all walks of life. (The communists once sent a letter complaining that the Americans would rather fight amongst each other than organize. I have heard that somewhere nearby, recently). There are thousands of those stories, making it very clear that labor was always overpowered by business and their boot-lickers in the government.

Such industrial unionism was pretty well killed off by 1920, and what we have left is predominately business unionism, because they found that for a little more lunch money and a bit more per hour most of the people would go back to work.When the government finally put in some protections it was more to co-opt those that would have taken control, as the post above infers. It's questionable how much things have changed. For example, Gomper's meetings with his business cronies, here, look a lot like Timothy Geithner's and his banker buddies in our time, story here.

So when the post above says "when we had the opportunity", I am not so sure that ever really existed, and still doesn't on any large scale, given that the government still eagerly works on the side of the very business interests that oppress labor and stole or destroyed what little wealth tens of millions of people had. (Something to ponder when people insist they are on "our" side, if the past 150 years or so teach us anything).

Regardless, you are 100% correct, workers will keep begging for scraps until they begin to own the assets. That's a lesson people are now living, paying the tuition with their lives. Given that most any of this is readily available in university libraries, but rarely taught or even reference, it is questionable how much we will recognize that we are having the same conversations over and over again.







Reply to this post

Back to top Alert abuse Link here Permalink


Response to jtuck004 (Reply #38)

Sun Feb 24, 2013, 06:00 PM

68. + 1,000,000,000,000



What jtuck004 said...to the MAX!

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 07:59 PM

22. Unlike SS, workers can take $$ out of 401ks & IRAs, it is a big policy mistake.

And it is why SS is so successful as the safety net. Workers cannot take out until they retire. And so the the $$ is there in old age. Todays, families are hit hard with financial blows and they turn to their private retirement funds as the safety net. It is a big mistake to let the private sector guide the retirement of workers.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 08:02 PM

23. These plans all started with the head honchos

looking for ways to get more out of the company than their pay checks, which were taxable. They wanted a way to defer taxes on THEIR compensations. These people were later reined in with restrictions on contributions for Highly Compensated Employees. But those regulations came later. These were set up to give tax advantages to the top tier in the company. They were not looking to benefit the rabble.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 08:13 PM

24. Go with Vanguard

the low cost retirement mutual fund company. It doesn't do anything spectacular, but it also doesn't fail in an epic way.

Current YTD in my IRA is 3.7%. Last year, I earned 15%. The only time it failed miserably was during the Bush years (2008-2009, and 2002-2003). Now I'm wiser and will move my funds to more conservative bond funds when an airhead GOP is in office. When a Democrat is in office, I can go after more aggressive growth funds.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 08:13 PM

25. k&r ! . . .n/t

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 08:35 PM

27. You, sir, are a true revolutionary. Thank you! nt

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 08:53 PM

28. K&R Bookmarked to send to my thirty somethings! Thanks. nt

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 10:17 PM

31. A "defined contribution" pension isn't a pension plan at all. It's a savings account.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to reformist2 (Reply #31)

Sun Feb 24, 2013, 06:10 PM

71. Actually, according to pension law, it is. It's a defined contribution pension. nt

Reply to this post

Back to top Alert abuse Link here Permalink


Response to antigop (Reply #71)

Sun Feb 24, 2013, 08:41 PM

77. I really don't care about pension law. I'm talking about common sense.


Reply to this post

Back to top Alert abuse Link here Permalink


Response to reformist2 (Reply #77)

Sun Feb 24, 2013, 09:17 PM

78. well...it makes a difference when you are trying to find out what your rights are. You have to look

at pension law because that's what determines what your rights are for pension plans -- both defined benefit and defined contribution.

There are also regulations that apply.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sat Feb 23, 2013, 10:58 PM

32. The important distinction is that with a pension...

the employer agrees to a pre-determined output. That is they commit to pay you $X dollars/monthly. Even if sales go down, even if the investment market in which the pension fund is placed goes down, the employer is still on the hook each month of each pensioned employees retirement. This presents significant risk for the employer, as they are gambling on the investment market and/or their own companies business over multiple generations.

With a 401k, the employer agrees to a certain input. That is they commit to match up to (usually) Y% of the employees salary, provided the employee contributes that much. This provides no risk to the employer.

I think a strong argument can be made that American workers deserve a secure retirement, but I don't think it's fair to blame employers for shifting away from a very risky model. Blame, IMO, is more properly placed on those who structure Social Security.

I think you may fairly criticize a number of US employers for insufficient matching to 401k's. You might criticize them for not partnering with better investment first to give more attractive options, but again, I don't think it's fair to criticize employers for wanting to gamble on what the market will do for generations ahead.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to maggiesfarmer (Reply #32)

Sun Feb 24, 2013, 08:47 AM

40. It is most definitely fair to criticize them. You are suggesting that it is fine for them to use you

up, use your labor, for 40 years, put all the risk on you, and still keep a company going that exists BECAUSE OF YOUR LABOR, and continue to profit from it regardless if the market drops and takes your life with it. Leaves that stingy bastard off the hook, so one of his kids can rack up, say, $20 billion while running the second largest employer in America, keeping a much larger share of your contribution to put into his, or her pocket.

I can criticize that all day long, and it's not unfair at all.


Reply to this post

Back to top Alert abuse Link here Permalink


Response to maggiesfarmer (Reply #32)

Sun Feb 24, 2013, 10:41 AM

46. Defined benefit is risky for the employee too

If a company goes bankrupt, the employees can often kiss their pensions goodbye.

Defined benefit is often a huge cost for employers, managing a large pension fund is often very expensive. That said, by switching to a defined contribution plan, the company is passing the cost down to the employees. However, at least if the company goes under, the employee still gets to keep their contributions.

No easy answer to this - I happen to think government programs like social sec in the US and CPP in Canada should be strengthened, because as it stands now, if you work in an industry that does a lot of contract work, or you switch jobs more than 3 times in your career, saving for retirement gets difficult, if not impossible for some. I agree sticking your money in the market is basically gambling, but what choice do people have? Stick it in a savings account that earns 0.6%? Most people don't have the money for the good financial advisors, and the ones they end up with don't know enough to earn them decent returns regularly. It's all a huge risk to the employee. That's why I think the government programs for retirees should be strengthened, and caps should be removed. The rich should pay into it and not collect. It's just the decent human thing to do.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 01:16 AM

33. +1

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 01:20 AM

34. In Wisconsin they are selling this as a contribution package and not as a benefits package...

I wonder if congress would might this contribution package in stead of the very generous benefit package...

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 08:34 AM

39. K & R. Thank you. n/t

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 08:50 AM

41. People who change jobs frequently are generally better off with a 401k than a traditional pension.

Especially when there is a company match.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 09:25 AM

42. I like the idea of a worker protection agency, but

that's doesn't mean we should do away with the consumer protection. It's weak enough as it is, but it is helping us plebes a little bit.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 09:30 AM

43. Why not simply tax corporations that don't provide pensions to establish a national pension fund?

Single payer, single pension. Doesn't that make sense?

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 10:11 AM

44. The Personal Finance Industry Scam (with Helaine Olen)

Pound Foolish, author Helaine Olen explained her background as a personal finance writer, how the personal finance industry got started, the story of 401ks, the problem with Suzy Orman, how the financial services industry turns what are political problems into a personal problems, the genius of Occupy, the urgent need to regulate and the financial services industry..




It's all a scam and they are bleeding us dry.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 10:35 AM

45. sorry couldn't disagree more.


First point, let us clear up one thing. Most employers match 401k contributions, and assuming this is the case then the 401k is a much better deal.

A career Federal Employee who makes $ 40,000 a year ( a little low even for the average) contributes 5% and has a 5% government match would have a 401k (called TSP for federal employees) worth $ 800,000 if they worked 40 years and got an average 7% return (roughly the average of the SP 500 over long periods).

If they contributed 10% and got a little bit over average, say 9% then that number escalates to well over $ 1,000,000.

Now for your glorious pensions which would pay out, at let's say 65% of your high 3 years; What is 65% of zero.

Pensions sound great but they only pay while you are still alive and for that reason pensions have always been a much worse deal for minorities with shorter life expectancies.

In my family how much would our family have gotten from pensions. Not one penny. No male, until this generation, has ever made it to retirement age. IF you have a 401k then that is a permanent asset.

There are other problems with pensions. They are not portable. That means that you end up not taking jobs with other companies because you are trying to get your pension vested. 401ks go with you. You can roll them over and take them with you.

Back to the federal government. They don't have a 401k, they have a hybrid. Base pension (FERS), 401k (TSP) and Social Security.

It has become indemic to DU that we put a label on something and it is all good or all bad and that is what has happened here.

The best result would be a combination a) Base pension that is portable b) Matching 401k with c) Social Security.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to grantcart (Reply #45)

Sun Feb 24, 2013, 12:17 PM

50. Stop propagating the myth that defined benefit pensions are not portable

There is NOTHING in the law that prohibits a defined benefit plan from being portable

http://www.dol.gov/ebsa/publications/wyskapr.html


In a defined benefit plan, an employer can require that employees have 5 years of service in order to become 100 percent vested in the employer funded benefits (called cliff vesting). Employers also can choose a graduated vesting schedule, which requires an employee to work 7 years in order to be 100 percent vested, but provides at least 20 percent vesting after 3 years, 40 percent after 4 years, 60 percent after 5 years, and 80 percent after 6 years of service. The permitted vesting schedules for current defined benefit plans are shown in Table 3 below. Plans may provide a different schedule as long as it is more generous than these vesting schedules. (Unlike most defined benefit plans, in a cash balance plan, employees vest in employer contributions after 3 years.)


Companies can provide an IMMEDIATE annuity that the employee takes with him/her when he/she leaves the company. I know of a company that does this.

Please stop repeating the myth that defined benefit pensions are not portable. The law allows for them to be portable.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to antigop (Reply #50)

Sun Feb 24, 2013, 02:11 PM

61. You obviously don't understand portability.


Portability isn't the same as vesting.

In your example someone can get vested after say 5 years but that only means that they are vested in a the percent of that plan. For example if 5 years of that plan generates 3% of your retirement income based on your high 3 years of income you would probably be vested at 20% of that.

But it isn't portable at all. You aren't taking the pension with you. A truely portable plan would mean that there was a national pension scheme and that you could take tose 5 years and combine them with other employers of 5 years 9 years and 12 years, for example.

That isn't what is happening. If you leave you continue to have a vested interest in that plan, but what happens when Bain buys out that company, burdens it down with debt and the company fails? Pension gone.

I have worked with two companies and one I had a vested pension that is now worth nothing and another where I cashed it out. That company also went bankrupt but I paid the penalty and got the cash out, which wasn't a great deal but I did better than the rest that left it there and watched it go away.

If there was a national scheme that required employers to put their pensions in safe boxes and if you could then combine vested contributions from mutliple employers then you would have a portable system where your benefit went with you when you left. Singapore has a system like this but we do not. If we did then I would be 100% for it.

One company providing an annuity (good for them) is not only not a common example, it is not portability because you are not able to combine vested contributions into a single pension under your control (which you can do with a 401k). Moreover it is not how the vast vast majority of pensions are run. There are also companies that become ESOPs (Employee Stock OPtion) but to suggest this is a common, frequent or likely practic is, in your words, propogating a myth.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to grantcart (Reply #61)

Sun Feb 24, 2013, 06:04 PM

69. Stop propagating the myth that defined benefit pensions are not portable

I showed you what THE LAW is.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to grantcart (Reply #45)

Sun Feb 24, 2013, 12:48 PM

54. Sorry, but you're quite wrong about portability

You can indeed "take your pension with you".

I worked for a year in college as a teacher's aid. I still get letters about the pension I earned during that year. It's been about 20 years now.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to jeff47 (Reply #54)

Sun Feb 24, 2013, 01:54 PM

58. That's not portability and you didn't take you pension with you.


Portability would mean that you put in 5 years at one place 2 years at another and 7 in another and they could all be added together.

Moreover the only reason that it still there is that it is a college and the college is still in existence.

I have worked for 2 companies that are no longer in existence and their pension funds also went away.

Your pension is still at the institution you worked with, you didn't take it with you and combine it with other employers which is my point about it retarding employees from changing employers. This is particularly important when you take into account changing technologies or hostile takeovers by Bain time predators. What do you think would have happened to your pension if you worked for a company that was bought out by Bain and then went bankrupt because of debt?

Reply to this post

Back to top Alert abuse Link here Permalink


Response to grantcart (Reply #58)

Sun Feb 24, 2013, 06:05 PM

70. It's called the PBGC. nt

Reply to this post

Back to top Alert abuse Link here Permalink


Response to grantcart (Reply #58)

Sun Feb 24, 2013, 09:30 PM

79. Because the PBGC doesn't exist.

So....working for a stockbroker now or something?

Reply to this post

Back to top Alert abuse Link here Permalink


Response to grantcart (Reply #45)

Sun Feb 24, 2013, 02:00 PM

60. My state university pension is portable. Reciprocal agreements with other states are also common.

So, when I retire I can take a lump sum or lifetime pension payments with survivor benefits. Or if I go to work at a school in another state where a reciprocal agreement exists I can combine the new and old accounts.

On edit, up to the time I became vested in the pension system (~7 years or so, I think), had I left my institution for the private sector I would have cashed out my contributions.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to Gidney N Cloyd (Reply #60)

Sun Feb 24, 2013, 02:18 PM

62. Right. and Federal government pensions are portable. If you move from the Post Office to


the USDA it would be portable.

That really isn't portability because you are basically staying in the same system.

Your state university system cannot be combined with a pension with say IBM.

Comparing pensions from government institutions that are always going to be there is not the same as private companies that have no guarantee of permanence once the company goes bankrupt.

How much better it would be for you if in addition to your pension you also had the opportunity for matching 401k (maybe they do) which as I said is the best option.

In any case the other problems with pensions still exist. A person that has a great pension (100% of salary) who dies one year after they retire leaves no benefits to his/her heirs (If married there MIGHT be a spousal survivors option).

A hybrid of pension and 401k and SS would be the best option, if pensions could become truely portable and protected.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 11:05 AM

47. Think again.....

If you think that this is a conspiricy to transfer of wealth away from the worker, you're missing some history.

The mistake is made when you claim "part of the money that each employee earned was put into a pension account" This is dead wrong. The employee indeed helped the company earn this money but nothing ties the worker to any specific amount of money. This is important because companies that funded pensions might fund more or less in any given year due to business reasons. They might choose not to fund a pension at all in a particularly bad year. There's more. Companies and some Unions used pension funds to invest in risky and questionable activities. Pension fund embezzlement happened regularly.

My 2 grandfathers, each lost their pensions for the above reasons while they were in mid retirement. That is transfer of wealth away from a worker.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 12:25 PM

51. WSJ: Pensions for executives on the rise

http://online.wsj.com/article/SB125719963066023835.html


Pensions for top executives rose an average of 19% in 2008, with more than 200 executives seeing pensions increase more than 50%, according to a Wall Street Journal analysis.

The executive-pension growth stemmed partly from generous pension formulas, which are based on executive pay, according to the filings. Also adding to the pension jumps are arcane techniques that have received little scrutiny, including increases triggered when an executive reaches a certain age or when companies change interest rates used to calculate the pensions.

Executive pensions rose even as the share prices at the companies declined an average of 37% in 2008 and many firms froze employee pensions and suspended retirement-plan contributions.

The growth of such supplemental executive retirement plans, or SERPs -- which can be worth tens of millions of dollars to executives -- largely has been overlooked amid a backlash against executive pay, particularly at banks and other companies receiving taxpayer bailouts.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 12:27 PM

52. Traditional Pensions are Casualties of a Retirement Heist

http://money.usnews.com/money/blogs/planning-to-retire/2011/09/15/traditional-pensions-are-casualties-of-a-retirement-heist

Companies often say they are freezing their traditional pension plans and eliminating retiree medical benefits to remain competitive with pension-less employers overseas and cope with an aging workforce and stock market losses. But in a shocking new book, Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers, Wall Street Journal reporter Ellen Schultz explains that pension cuts are actually an accounting maneuver that is being used to boost corporate earnings. The massive retirement liabilities that many companies report are actually caused by unfunded executive pensions and deferred compensation plans, not the pension obligations to ordinary employees, she found. U.S. News asked Schultz to explain why traditional pension plans are really being frozen.


Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 12:57 PM

55. You left out another major rip-off that happened...

At one point the stock market was going up, so the pension investments went up too.

Then the business execs declared the pension funds as 'over allocated', cut back funding and took cash out of the funds, using the newly found extra cash to pay themselves bonuses and or shareholder profits, or if government orgs to fund tax breaks for the wealthy.

Then when the stock market dived, and now the funds were 'under allocated', the execs declared the funds unsustainable and worked to cut benefits or complain that workers were getting too much.

Which is where we are now. The pensions were never in trouble if the money criminals didn't raid them. It was just another way the 1% have stolen from the rest of us.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to on point (Reply #55)

Sun Feb 24, 2013, 07:03 PM

75. Thank you very much for this addition.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 01:59 PM

59. The last place I worked,

I had to opt out of the 401k plan or I would have been automatically enrolled at the lowest level. That was new. In the past, you always had to sign up when you were hired or during open enrollment.

My husband's company implemented that policy a few years ago. Suddenly he had to opt out, even though he had never signed up. So all the employees got a pack from HR. If you had a 401k, you could change it, & if you didn't, you could opt out or you would be enrolled. Imagine my surprise when I opened the pack & it said that hubby had $14,500 in a 401k account! Of course it was an error & I called. The company is huge & there is another person with the same name. He probably had heart failure when he saw he had no account.

on edit: Also, there are stories of companies raiding the 401k account. I've never had one & would never sign up for one.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 02:52 PM

63. The difference between now and then is not pensions

The difference is distribution of income and wealth. The current levels of concentration of wealth and income are unconscionable and stupid. This has to change.

As for individuals, you have to spend less than you earn. Saving money and compounding your return are the keys to amassing wealth. If you can do the investing yourself you can save a.lot of costs.

And too you have to diversify your investments.

While I am sympathetic to the pension idea here I am not so sure that this is in and of itself a real problem.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 03:43 PM

65. When are we going to fight back?

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 04:13 PM

66. K&R

Great Post!

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 04:48 PM

67. The company I work used to give employees an annual Value Added Statement

This was a statement that showed the employee's total salary and also the value of all other contributions that the company made on behalf of the employee, such as money they spend on pensions, health care, long term disability insurance, life insurance etc.

A number of years ago they stopped it. I can only guess they stopped it because the statement made it painfully clear to the employees how the total compensation package was getting smaller and smaller every year, as they moved health care costs and retirement saving costs to the employees to pay from their regular income.

BTW - this is my first comment ever. I have really enjoyed this forum as a frequent reader for a long time now. You guys and gals rock!

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 06:17 PM

72. All that is true but employer based pensions won't work anymore

Employers are no longer loyal to their employees so having one stay a long time is much more unusual than the days when someone would work the same place for decades or even a lifetime.

There is also that the pension stops when the worker dies, and all that deferred salary is of no benefit to the spouse or children.

People, understandably, want their "pension" in their own name. If we can find a way to keep the wall streeters from wallowing in the lake of 401K and IRA cash, and get employers to fully fund personal retirements..... make the investments secure so one is guaranteed a payout of at least the principal plus inflation, then these will work better than pensions did.

Getting to that point I'm not sure is possible though......

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 06:44 PM

73. What happened to pensions

The problem with the old pension plans was it was too easy not to fund them and they left/leave the retiree at the mercy of the company.
The problem with 401K plans that replaced the old pensions is that most companies don't add enough or any where near what their responsibility was under a defined benefit pan.

A better solution is a 401K plan with a mandated minimum pension contribution as a percentage of the employee's pay. An example is based on 25% of pay. The employee would have 10% of their pay deducted and the employer would be required to pay 15%. The money would be paid into a restricted 401K plan in the worker's name as wages are paid outside of control of the employer. The money couldn't be touched until retirement.
The money could not be borrowed and could not be invested in the employers stock. The money would be required to be invested in US securities only with no more than 20% in any one approved stock, bond, bank CD, etc.

At retirement, the typical worker would have millions in their account.
They could choose to invest in annuities or simply live off the earnings.

This plan though not perfect, would eventually solve most of the retirement problems we face today.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 06:47 PM

74. K & R !!!


Reply to this post

Back to top Alert abuse Link here Permalink


Response to 1-Old-Man (Original post)

Sun Feb 24, 2013, 07:24 PM

76. REQUIRE A MINIMUM PENSION CONTRIBUTION

REQUIRING A MINIMUM PENSION CONTRIBUTION into a 401K plan as a percentage of the employee's pay is a better solution!

An example is based on 25% of pay. The employee would pay 10% and the employer would be required to pay 15%!

The money would be paid into a restricted 401K plan in the worker's name as wages are paid outside of control of the employer. The money couldn't be touched until retirement. The money could not be borrowed and could not be invested in the employers stock. The money would be required to be invested in US securities only with no more than 20% in any one approved stock, bond, bank CD, etc.

At retirement, the typical worker would have millions in their account.
They could choose to invest in life annuities or simply live off the earnings.

This plan though not perfect, would eventually solve most of the retirement problems we face today!

Reply to this post

Back to top Alert abuse Link here Permalink

Reply to this thread