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the SOLUTION was the three-legged stool:
social security, pension, personal savings (this has turned into 401k).
Close. The 401K is an employment based retirement plan ...and meant to supplant pensions.
IRA's and similar pretax investment plans have a similar rationale.
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We can now consider personal savings the third in place of the pension.
No... we can't. We still need personal savings and for the same reasons we always did.
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The thing that made pensions unstable was the increased life expectancy of recipients.
This is a good problem if you ask me.
Well, that didn't help... but the unsustable part is almost entirely about underfunding and ransacking by management.
No it was raised hence Californians are now obliged to pay. Let me a Google for you. How a pension deal went wrong and cost California taxpayers billions - Los Angeles Times
And the rest you can google for yourself before coming here and spread nonsense.
Edit to say, they used 7.5% rate, very high Rate of return. Unsustainable. It went from 4.5% to 7.5% under unions.
Try again. Neither of your links support your claim that raising the assumed rate-of-return would increase pension obligations. Perhaps you can directly quote it?
It's simply not mathematically possible. And you aren't comprehending that. For instance: If I assume that my 401k will gain 7%, then I could contribute less than if I had assumed a 2% rate-of return. Why? Because the higher asset appreciation would compensate for lower contribution.
The same concept applies to pensions.
Last edited by RisingAurvandil; 01-22-2017 at 08:45 PM..
That's the problem today. In the past companies offered good wages, benefits, and a pension plan to keep good people around. Jobs today just seem temporary and disposable rather than the 30+ year careers they used to be. but it's a win win for both parties. The employee can shop around for better deals, and the employer does not have to deal with the burden of a long term employee.
What the OP is getting wrong is the idea that pensions were suppose to be a solution. Someone mentions it a few comments up the SOLUTION was the three-legged stool: social security, pension, personal savings (this has turned into 401k). We can now consider personal savings the third in place of the pension. If you are looking for S.S, a pension or 401k to replace 100% of income you are mis-guided, that was never supposed to be the plan. Most pension plans that are in trouble are the ones that pay out huge percentages of final earnings or the top three/five years.
LOOKING FOR ALL THREE TO EACH REPLACE ABOUT 30% of income creates a more realistic funding rate. I think that's because that was the intent of most plans. This was also never for 100% of americans.
The thing that made pensions unstable was the increased life expectancy of recipients. This is a good problem if you ask me.
If the OP is somehow making an assumption that people with pensions ARE relying on them solely, well that would probably be incorrect. It certainly would be in my case. I would most likely be able to live very well off just my pension and SS, but I don't plan on that. I also contribute to a 457b that will likely wind up being over a third of my retirement funds.
That said, our pension plan is absolutely one of the most attractive benefits we offer.
If the OP is somehow making an assumption that people with pensions ARE relying on them solely, well that would probably be incorrect. It certainly would be in my case. I would most likely be able to live very well off just my pension and SS, but I don't plan on that. I also contribute to a 457b that will likely wind up being over a third of my retirement funds.
That said, our pension plan is absolutely one of the most attractive benefits we offer.
I guess I could be wrong in that assumption. Hopefully the Op will let us know?
I said that because to me no matter how dire people make pensions and social security seem really the problems are four-fold:
1. People living longer
2. Funds in trouble not able to pay out the full benefit
3. Mis-mangement
4. Generous benefits given out based on false financial logic of affordability
I think in terms of solutions. All four can be solved by making adjustments. The most logical one to me is to cut payouts to a sustainable level. If someone is relying on any one option they are potentially screwed. But if people are using a few (hopefully all four, I know access is limited) then while you may still feel jaded, it's now obvious that our past assumptions were wrong so we need to adjust.
For whatever reason we have spent the last generation throwing blame about the issue and we are now in the process of rolling TEMPORARY FIXES over to another entire generation to deal with. I have a pension, it's an attractive part of my benefits package and me and my friend joked at orientation about how long it would take the company to cut the benefit.
What the company did was also one of the reasons why this company is attractive.
The old pension was defined benefit based on pay and years of service, fully funded by the company. It was extremely generous but a huge unknown liability.
The new pension is a cash balance, fully funded by the company. They will contribute 5% of your salary a month and a credit for a return based on treasury yield. It is extremely generous and a huge MEAUSRABLE liability. I believe it's sustainable even if the company runs into trouble.
That is solution I can believe in and use to plan my future. I hope we can get there with all pensions and S.S.
Underfunded. Unsustainable. These are favorite words of the fear-mongering right wing, few of whom are apt to have fully funded their own future mortgage obligations, their own future federal, state, and local tax obligations, or even the next decade of their own dental bills.
Regardless of what some "right winger" is saying, your post is a complete butchery of accounting standards. Please just stop citing what should be "fully funded" as if it were akin to accruing for an actual future obligation.
Now back to topic, the argument takes on nuances because a government entity has taxation and other powers that a private entity does not. This takes us to the big "WHY" of public pensions largely operating as pay-go plans instead of pre-funding liabilities like a private pension plan. In general, this is ok.
While the vast majority of public pensions will be fine for CURRENT ENROLLEES that's not the thread topic.
My home state of Illinois has a dire pension crisis so while they failed to cut current pensions, that doesn't mean it can't happen to anyone else as laws vary. ALSO let me make a REALLY key point that they CAN change the pension rules on someone that isn't "too old" so even though you're 40 and have been working there 15 years you might not be safe from having your future pension cut drastically at a point in time where you may not be able to adjust sufficiently.
Another poster said something along the lines of a 401k being better than no pension, a failed pension etc.
I specified "good pension" and you addressed EVERYTHING BUT!
(Eta: reading your other responses.... seems you can't do what you high handedly tell others they need to!)
-it's also highly amusing you'll call military pensions "rich federal pensions" etc.... pot meet kettle.... in SO MANY ways.
Let me know when you want to discuss the same topic.
Yes, pensions can fail, so can investments.
This is why (as I've already stated) BOTH is best.
Can't have both with no pension.
But if we assume it's going to be a "good pension" then that takes away all the potential problems that can arise with pensions.
If you want to compare a "good pension" to just a 401k plan then there really isn't anything to debate.
If I'm missing your point then please restate what it is and I will try to respectfully respond.
I don't know many private companies provide a pension plan for their employees anymore. I know I can retire comfortably on my pension alone (of course with no mortgage payment by the time I retire). I'll be still young and healthy enough to enjoy life. 401K and SSA will be just supplementary to my income then. Say you save 1 million in your 401K. With a very conservative investment approach so you won't lose your nest egg, you may make only 2-4% interest on it. So 20-40K/yr may not enough for you to retire. Most people won't even able to save that much by retirement, so they'll may have to work much longer.
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Please just stop citing what should be "fully funded" as if it were akin to accruing for an actual future obligation. 
