More details would be great. In CA your Teacher pension benefit is based on number of years of service. You all of a sudden don't get a great pension after 10 years of service. My Mom was a teacher in CA and worked for almost 42 years and she does have a great pension benefit but that was for 42 years of teaching. Also I believe there is also what they call a windfall provision which reduces a public employee pension if Social Security is also collected. So if you also qualify for say $800 a month in Social Security benefits and you take it you lose $800 a month in pension benefits. This really hits hard the people that switch careers in mid-life to start teaching.
Have you ever actually looked at the costs in defined benefit plans vs. say, 401(k)?
Per dollar contributed, pensions provide much greater returns. Retirement accounts exist to maintain some standard of living after you stop working, and pension funds generally see much higher rates of return than individual 401(k) accounts due to lower fees, more institutional power, etc. The reason why companies are offloading pensions when possible is that if things go south the company is left holding the bag with a pension while with 401(k) the employees are screwed. It's not an expense thing, it's a risk thing.
If your goal is to be the best steward of taxpayer money possible, basically any large institution like a city should be using pensions instead of 401(k) contributions.
O RLY? Oh wise liberal, please explain in your AMAZING economic ways why a pension plan is better than a 401k. Pro/Con list if you will.
Please. Do Tell. :awe:
Anything taken from the corporate is better than from the individual pocket (in a liberal opinion).O RLY? Oh wise liberal, please explain in your AMAZING economic ways why a pension plan is better than a 401k. Pro/Con list if you will.
Please. Do Tell. :awe:
Uhmm, the post you quoted did just that. Pension returns regularly outperform 401(k) investments with lower per capita fees. This is generally due to the large amount of money in a pension fund along with an infinite time horizon for investment, etc. If an investment regularly sees higher returns, you can support the same level of retirement funding for less money.
The downside, as I mentioned, is that the risk then lies with the employer instead of the employees. Naturally businesses would rather their employees get screwed if something goes wrong than get screwed themselves. Also, if your pension fund is of insufficient size (ie: your business is too small), you don't get the other benefits.
401(k) investments were never intended to replace pensions, btw.
My mom knew a very successful private music teacher who made very good money. All of a sudden, in her late 40's, she went back to school to get a music education degree and took a job teaching music at rural public school (state of Illinois). She went from teaching very high-level private students to babysitting rural farmboys and girls trying to clap out a proper rhythm.
Why? I don't remember the exact details, but I'm pretty sure my mom said she only needed to teach for 10 years to qualify for a very nice pension. That was probably about 7-8 years ago, so I'll have to ask my mom again about the details.
From a retirement account perspective, you have absolutely no idea what you are talking about. I don't even know where to begin with you :\
However, a pension plan may have more clout w/ respect to costs of the investments.
I wonder if this is true. Costs of investment is at an all time low, even for regular IRA accounts. For example, I'm paying an average of an .20% annual rate for my IRA. That means for every 100 dollars, I'm paying 20 cents.
Democratic politicians promised their loyal government workers that their pensions, their health care, and their city's bills would all be paid with other people's money.In FY 2014, without restructuring, Detroit is projected to have negative cash flows of $198.5 million.
Detroit's long-term debt is estimated to be between $18 billion and $20 billion.
The city has unfunded pension liabilities of $3.5 billion.
Its unfunded health care liabilities are $5.7 billion.
The city currently has just 9,700 workers, yet has 21,000 retirees drawing benefits.
... per capita tax burden on Detroiters is the highest in Michigan...
USAToday
Is that for people that paid into social security or those that weren't required to?
What gets me, the feds have been dumping 85 billion into the market every month, but investments are at an all time low?
Something just does not sound right.
That money has to be going somewhere. And I am going to guess that "somewhere" is not to the people.
Have you ever actually looked at the costs in defined benefit plans vs. say, 401(k)?
Per dollar contributed, pensions provide much greater returns. Retirement accounts exist to maintain some standard of living after you stop working, and pension funds generally see much higher rates of return than individual 401(k) accounts due to lower fees, more institutional power, etc.
The city currently has just 9,700 workers, yet has 21,000 retirees drawing benefits.
Democratic politicians promised their loyal government workers that their pensions, their health care, and their city's bills would all be paid with other people's money.
Anyone surprised by the way that that worked out?
Uno
You might be thinking about the federal reserve.
The federal reserve is bailing out blockbuster, so why not Detroit?
I don't understand how this is possible.
First my fees on my 401k are 0.05%. Can a pension fund really beat that?
Second a pension is required to sell assets, even if those assets are undervalued, in order to pay retirees. With a 401Ks you can delay mandatory distributions when the economy and stocks have tanked, delaying selling those assets until they are better valued.
And the greatest reason why the pension funds can't beat a 401K is because they aren't being fully funded. A 3% employee match on a 401k will always beat an unfunded pension anyday. This was the problem with Detriots pension. They weren't able to fund it because they were always running a deficit. If you have a 401k and the company can't fund it, you know that and can leave to find a company that can match.
I'm guessing you meant 0.5%. The average total annual fees (investment, bookkeeping, etc) for a 401(k) plan averages about 0.78%.
http://www.ici.org/pdf/rpt_11_dc_401k_fee_study.pdf
(page 6)
The average annual fees for a state run pension system total about 0.41%
http://mdpolicy.org/docLib/20120803_MarylandPolicyReport201204.pdf
(page 2)
Actually the advantage is the opposite and in favor of pensions. Pensions generally have a large pool of diversified assets at their disposal, only a small fraction of which need to be paid out at any one time because pensions are effectively "immortal". (ie: they aren't tied to one person's lifetime and the membership continually rolls over)
People frequently need to retire within a fairly small window of time, so they are MUCH more vulnerable to being forced to sell large quantities of undervalued assets in order to meet their needs. Pensions have far more flexibility in this respect.
I absolutely agree, pensions are vulnerable to political monkey business in a way that 401(k) is not.
One other thing you left out is that pensions routinely see MUCH higher rates of return than 401(k)s do. The thing I was looking at was that for each $1 a company or government invests in retirement funds for their employees, which form of retirement gives the most bang for your buck? The answer is pensions, and it's not even close.
Yes, but they were completely tangential to what I said. My point is that by their very nature, defined benefit pension plans are doomed to failure. I gave a brief, common language explanation and used a related example topical to the times we live in.
His point is that defined benefit pension plans are wonderful things to do. As is typical, he chooses to ignore the financial reality of the situation and tries to move the conversation off track by spinning it with rainbows and unicorn farts. It's based in his not wishing to acknowledge the inherent failure built into the majority if not all entitlement programs.
It's not worthy of a response which is why he got what he got. On a greater level, this is why we are in the financial straits we find ourselves in. There can be no honest conversation that is based in reality. When side A wants things, and they can get these things through political power, side B is wasting their time trying to explain the future consequences. Side A has no intention of listening.
When you try to divert the subject I react in one of two ways. Ignore what you say or give you a blast of shit. Today he got the blast of shit.
Keep digging your own grave further and further with an obvious lack of financial knowledge. Maybe someone like Eaglekeeper will have the courage to TRY and spell it out for you...
And people wonder why this generation is doomed....
O RLY? Oh wise liberal, please explain in your AMAZING economic ways why a pension plan is better than a 401k. Pro/Con list if you will.
Please. Do Tell. :awe:
They gladly stood by and lived in ignorant bliss.
Look at Grand Rapids recovery compared to Detroit. We are thriving because we didn't wait for someone to fix it for us.
I don't know why people always cry about employers not offering pensions and instead moving to 401k's... It's called diversification, and it very well could just save your fuckin' ass some day.
From a retirement account perspective, you have absolutely no idea what you are talking about. I don't even know where to begin with you :\
I'm guessing you meant 0.5%. The average total annual fees (investment, bookkeeping, etc) for a 401(k) plan averages about 0.78%.
http://www.ici.org/pdf/rpt_11_dc_401k_fee_study.pdf
(page 6)
The average annual fees for a state run pension system total about 0.41%
http://mdpolicy.org/docLib/20120803_MarylandPolicyReport201204.pdf
(page 2)
Actually the advantage is the opposite and in favor of pensions. Pensions generally have a large pool of diversified assets at their disposal, only a small fraction of which need to be paid out at any one time because pensions are effectively "immortal". (ie: they aren't tied to one person's lifetime and the membership continually rolls over)
People frequently need to retire within a fairly small window of time, so they are MUCH more vulnerable to being forced to sell large quantities of undervalued assets in order to meet their needs. Pensions have far more flexibility in this respect.
I absolutely agree, pensions are vulnerable to political monkey business in a way that 401(k) is not.
One other thing you left out is that pensions routinely see MUCH higher rates of return than 401(k)s do. The thing I was looking at was that for each $1 a company or government invests in retirement funds for their employees, which form of retirement gives the most bang for your buck? The answer is pensions, and it's not even close.
Have you ever actually looked at the costs in defined benefit plans vs. say, 401(k)?
Per dollar contributed, pensions provide much greater returns. Retirement accounts exist to maintain some standard of living after you stop working, and pension funds generally see much higher rates of return than individual 401(k) accounts due to lower fees, more institutional power, etc. The reason why companies are offloading pensions when possible is that if things go south the company is left holding the bag with a pension while with 401(k) the employees are screwed. It's not an expense thing, it's a risk thing.
If your goal is to be the best steward of taxpayer money possible, basically any large institution like a city should be using pensions instead of 401(k) contributions.
Reports are fascinating to read :thumbsup:
As somebody who has taken control of his own 401k in a self directed account in the last 6 months. I have learned there is more to fund or etf than the % it gains over the course of time. Management costs\fee's can eat into it rather deep. Some of these funds I was researching were gaining more than the typical market. But their costs were unbelievable. One of them topped out at 7.5%! The other is transaction fee's. Which can be damn near highway robbery for an avg 401k participant who just puts money away without thinking.