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Those cost are not internal you need to do a better job of reading and researching
Investment External Management3 $1,030.0, that's a billion right there and another 250 million to the tpa. Again you clearly don't understand the subject
You say my liability ideal is a lie and then go on to detail how it is in fact exactly the truth. That gap between 77k and 3 million is a liability now on the employee where as before the pension liability was on the employer
Look, you're missing the point. My pension is derived from a fund that is over 2 billion. Our administrative cost run about 16 million a year. You do the math, but is way less than even a 1/2 %. These pay investment managers, and people who process the payments. I know nothing about CALPERS other than it is huge. Are you claiming they spend a billion a year? Have you been feed a conspiracy about who evil it is?
My point was very simple. Financial institutions gain from 401k's whereas pension funds they did not. Your personal responsibility ideal is fine, but will bite you in the end when very few have saved what is needed. Who has really profited from the 401k is Wall Street saving on not paying in to pensions, and the .78 % skim. Not including the current front running now occurring where funds like calpers are being bilked.
It is amazing how this stupidity is spread the the media. You do realized most calpers participants receive no SS, and it is their sole retirement. I must assume you've been feed a evil conspiracy theory against these members.
Since the advent of 401Ks more people than ever before have employer sponsored retirement plans in the US. 401Ks offer less risk for the employer, so more employers are willing to start a 401K than a pension. More people with retirement plans are a good thing.
#2 It isn't just 401Ks that carry risk - so do pensions.
Pensions are getting reduced across the country. Some small automobile parts manufacturers were not protected in the GM/Chrysler bailout and had to severely slash their payouts. The city of Detroit's pension payout is taking a hit. Pensions across the country are underfunded and may have to slash payouts or increase employee contributions. Wouldn't it stink to be in retirement counting on a specific pension payout and then to have that slashed with no recourse?
In someways isn't it better to have the money in your investment hands as opposed to the corrupt Detroit Pension board of trustees?
#3 What if you change jobs?
401Ks are more likely to give you vested money and at a higher rate if you only worked there for 5 years or less.
You switch from a 401K job to a 401K job and you can just roll over your balance and not miss a beat.
You switch from a pension to another pension job and you may never have a good retirement pension based on the pension formula and years worked.
#4 Taxes, some 401Ks give you more tax flexibility.
My 401K has a Roth option. I can mix and match between traditional and Roth 401K funds to better prepare for taxes in retirement. Also, I can adjust the amount that I take out of my traditional to adjust for optimal taxes I will owe. A pension has its money come and will be taxed - there is no wiggle room on it.
#5 Emergencies, give 401K an advantage.
You can take an emergency loan out of a 401k, but not a pension. Only recommended in true dire emergencies.
#6 Prefer a pension's set monthly payments?
You can use your 401K in retirement to purchase an annuity, which is like a pension. Some 401K plans like TIAA-CREF offer an annuity option within the 401K plan.
#7 401Ks give employers more flexibility.
I read an article awhile back that since Ford's pension investments had under performed, Ford had to stick $2,000 of every new car sold into its pension plan to pay ALREADY RETIRED workers. While Toyota with a 401K was paying $0 of every new car sold to ALREADY RETIRED workers. Thus the article explained why Toyota was able to invest far more money into research and development and improve their product more so than Ford. If you hold a pension with a company, don't you want that company improving not lagging behind the other companies???
#8 Your heirs.
There is a chance that your 401K will leave something for your heirs...there really isn't that chance with almost all pensions.
#9 Fees.
Wait, I thought most 401Ks had high fees!!??!!?? Most 401Ks offer some options with low fees like index funds... zdon't forget most pensions have management fees around 1.5% eating into the amount invested...well above most 401K fees.
#10 Large purchases.
Say you want to buy a car, buy a summer cottage, pay off your mortgage with a large lump sum. Your 401K can allow you to get the large amount of money to do this and avoid paying the interest. Your pension can't - you are stuck with a loan.
in your analysis you are ignoring a very basic and very resounding fact that makes pensions more advantageous to 401ks. 401ks are self funded. Pensions are funded by the companies themselves with a minor contribution to the employee. Some pensions have no employee contribution at all.
A company with a very strong 401k benefit will match the first 5% of your contribution(100%) and that's it. The average pension contributor will contribute only 5% of the total pension contribution which is the equivalent of a 1900% match 401k. Have you ever heard of a company that offers a 1900% match on a 401k? I'm betting not. And despite the few pension failures you see on tv, a pension is much safer than a 401k.
If we look at the comparison objectively there is no way you can say a 401k is more favorable to the employee than a pension. It clearly is not. This article reads like someone trying to con some workers to give up their pension in favor of a 401k as part of some sort of union negotiation.
yes and no, a compensation package for the average joe that has a pension funded by the employer usually has a pay difference compared to one that does not.
most gov't and private sector jobs with pensions pay less to offset that fact. most folks are lousy savers and even worse investors so for them a pension was a better deal.
i was going to work for the post office decades ago but ended up staying in private industry. while the post office pension was nice i earned about 2x the pay. i did far better on my own investing that dough then the pention would have paid me.
Last edited by mathjak107; 05-18-2014 at 02:51 AM..
yes and no, a compensation package for the average joe that has a pension funded by the employer usually has a pay difference compared to one that does not.
most gov't and private sector jobs with pensions pay less to offset that fact. most folks are lousy savers and even worse investors so for them a pension was a better deal.
i was going to work for the post office decades ago but ended up staying in private industry. while the post office pension was nice i earned about 2x the pay. i did far better on my own investing that dough then the pention would have paid me.
Do public school teachers get paid less than private school teachers? Some specialized positions are more highly paid in the private sector but not many and certainly not most.
no but public school teachers with masters up until the recent downturn made far less than private industry with a masters. in fact here teaching and social working were the two lowest paying professions you could get with a masters and that was with the ny board of ed . so much so our college system is like a funnel to crank out teachers and social workers if you have no clear cut idea of what you want to be.
any time strong unions are involved like private teachers vs public school teachers the results will be skewed or union craftsman vs non union craftsman.. it is more a union thing in most areas .
a better comparison would be private school teachers with a pension vs working in another field with the same degrees and comparing compensation packages if no pension on the other job.
my wife is a private school teacher with a very small almost non existant pension. she could have earned 2x what she did or more in private industry in another field. she likes what she does so she didn't want to venture out.
my step son works for new york state as a welfare investagator. he has a pension and medical but is earning about 1/2 of what he did in private industry.
unless you have top skills like police , fire , electrician, plumber ,carpenter, etc it is rare you will find high pay and a decent pension. it is usually either or.
when i started out in my field i got called by the post office. while the post office offered a pension the pay was lower. i stayed in private industry and my pay is about 3x what i would have earned at the post office but i have no pension.
Last edited by mathjak107; 05-18-2014 at 06:43 AM..
Look, you're missing the point. My pension is derived from a fund that is over 2 billion. Our administrative cost run about 16 million a year. You do the math, but is way less than even a 1/2 %. These pay investment managers, and people who process the payments. I know nothing about CALPERS other than it is huge. Are you claiming they spend a billion a year? Have you been feed a conspiracy about who evil it is?
My point was very simple. Financial institutions gain from 401k's whereas pension funds they did not. Your personal responsibility ideal is fine, but will bite you in the end when very few have saved what is needed. Who has really profited from the 401k is Wall Street saving on not paying in to pensions, and the .78 % skim. Not including the current front running now occurring where funds like calpers are being bilked.
It is amazing how this stupidity is spread the the media. You do realized most calpers participants receive no SS, and it is their sole retirement. I must assume you've been feed a evil conspiracy theory against these members.
I am not missing the point. Pensions also pay fees to wall st and you have to be off on your pension cost. 16/2000 = 0.8% that's not way less than 0.5% it's actually 60% more. Calpers is he second largest pension fund in the us and their admin cost are close to 2 billion per year. 1 billion of which is paid directly to outside money managers is wall st, 250 million more is paid to their tpa the people who administer their plan. I don't have a conspiracy like you I have facts
I'm not sure what evil you are speaking of or what conspiracy you are rambling about. The fact they get zero SS is irrelevant to the fact that pension invest in and pay Wall st. It also has nothing to do with the fact that switching from pension to 401k shifted the liability/burden of retirement from the company to the employee. Rail road retirees don't get SS either but I'm not sure how that's relevant. Looks like you are wrong about calpers and ss
companies do not want to be in the business of having to invest money for ex workers. plain and simple they wanted out of that liability.
legacy benefits are killer especially with 14 years of stagnant markets, low rates and complex regulations.
This is all that needs to be said. But let's not pretend that anything else(such as more control etc) is even a minor issue. Pensions are clearly more advantegous for the employee and it's not even close.
This is all that needs to be said. But let's not pretend that anything else(such as more control etc) is even a minor issue. Pensions are clearly more advantegous for the employee and it's not even close.
Whoa as one who is sitting awfully darn good in retirement with both a pension and solid employee benefit investments it is not that simple. The devil is in the detail and that is very different from pension plan to pension plan and 401/403 to 401/403 plan. In many cases pension benefits are only obtained after retirement and if you die prior to, Nada for your spouse or family other than possibly a return of your contributions without interest. At least with a 401/403 you are vested in your full amount and it is yours and theirs. There is many a sad tale of a public employee with terminal cancer having to retire and take their pension with survivor benefits for their spouse. In the process they are giving up their health care insurance unless it is a benefit provided in retirement. That is major and is a consideration we all dread having to make in that situation. The percentage of final income that is used to calculate the benefit varies from plan to plan and not all pension plans are as generous and salary ranges for the same job vary from state to state. Even if survivor benefits are available in your pension plan the amount the benefit is reduced varies from plan to plan and can be as high as 50%.
On the other hand 403/401 investment choices are all over the place and some just plain stink and have little value over the pension. However the option is there to have it alongside the pension as many do. For my wife and I to have opted for annuities in our employee pension plan would have been crazy as our pension income along with SS is more than sufficient. In our case we had a full range of options including what is now 192 Fidelity funds at Advantage fee rates where they exist. Great for Index investing or using a Fidelity Newsletter. We even have access to opening any of the funds that are closed if they were part of our employer plan at any time. Thus funds like Growth Fund etc are still options.
I really consider this a nebulous question because the answer is both if you have a choice and if you don't you don't. I would hate anyone reading this to think it is either or and be choosing between if they can do both. When you hit the game over stage it is sweet to be able to leave your employer plan alone while not being able to add to you can leave it to grow other than Roth Conversions and eventual RMD's etc. Our plan is so good that we are leaving it in the employer account because of fees and usable choices.
Many a time was spent by myself and others encouraging folks to do both. Are there really employment situations where you have either or as a choice? Isn't usually one or the other and the norm is that where there is a pension (especially public sector) there is also the investment/annuity option?
Your pension is a payout one month at a time with no advanced payout option. Where as your nest egg is just that a nest egg.
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