WHY?

It sure wasn't to benefit the worker!

For example I get a 3500 dollar a month pension, but my neighbor does not have a pension but has close to a million in investments. When it comes time to replace the furnace, I have to hope I saved 6 grand. My neighbor just has to sell some stock or mutual fund money. Also the dividends he gets is decent.

But I have to contend with lets take away COLAs from retirees and let's cut the retirees pension everytime their is a "crisis". So both sides are not fully safe these days.

Pensions were not subject to the cuts every time the market went nuts.

Cutting them to make them the same is useless as there are so few pension plans left to cut. They have all been raided and pilfered to push everyone into the high risk category.

Do you think that the money paid out in a pension plan just magically appears? Is it kept under a sacred rock or something?

It's invested in the market. All pensions are. In ways that might scare the hell out of you.

You got what was calculated for your years of service.

With the 401K, your money is in the market and you could end up with nothing!

By what mechanism did the money set aside for you by your company grow to the point that 50% to 75% (or whatever) of your salary could be paid out over 20 or more years?

Do you think companies paid you say...$20 an hour and put another $15 per hour away for you?

By what mechanism were pensions "protected for the worker'?

First off, the investments in the pension could fail just like those in a 401(k) can. The company still had the obligation, but companies can go bankrupt. There is a PBGC backstop, but it isn't 100% of what you were due.

Much more importantly, workers dramatically changed over the last few decades. The average worker now has ten or more employers over the course of a lifetime. If all ten of those employers had traditional pension plans and not 401(k) plans... the worker could end up with next to nothing at retirement.

With the 401K, your money is in the market and you could end up with nothing!

With the 401(k), your money is wherever you elect to invest it. "End up with nothing" would be quite a feat.

An employee was willing to work for one company for 30 years and come away with a nice pension.

When did companies start going bankrupt - somewhere in the middle of the Reagan regime. Coincidence?

When companies pensions started to get robbed through bankruptcy etc. employees no longer had any incentive to remain with one company.

At one time, companies valued the long term employee, they saw them as an investment and didn't want to lose that talent. Not so much now.

Secondly, when you are in a 401K through your employer, you don't have much control over where it is invested.

You can't pretend that employees started bouncing from one employer to the next because pensions were going away. In most cases, they moved because job markets were robust and the new employer paid more (those were the days). In many cases, it was the new employer's lack of a pension (and thus higher immediate wage) that impacted moves. The author's argument that companies without 401(k) plans tend to pay higher salaries was true for pensions as well. All the company cares about is the total cost of employing you... but job hoppers were often very short-sighted.

In my experience (and I delivered my share of new-employee orientations at the time), new hires in their 20s and 30s were very interested in company contributions for things like health insurance and vacation days, but didn't put much effort into understanding their retirement plans.

When did companies start going bankrupt - somewhere in the middle of the Reagan regime. Coincidence?

Companies hardly started going bankrupt in the 80s. Care to try again?

Secondly, when you are in a 401K through your employer, you don't have much control over where it is invested.

Sorry. That's flat untrue. You may have a limited number of selections within each asset class, but you absolutely are not locked in to purchasing stocks.

you could put it in a market fund that usually made more,or put it into an account that was like a huge Union CD that made 4% or so a year.I did the latter and its all still there.

meaning it will be there no matter what,did a little reading and I believe this is it.

A single bank?

I'm not trying to bust your chops here, I am genuinely curious, that's all.

There are more than one type of CD and they vary regarding terms. The interest money has to come from somewhere. It isn't magically pooped out of the vault!

FWIW, I am a Teamster these days but unfortunately, we have no pension provision in our contract. The company offers a 401(k).

but I called a Union buddy that will know what its called and left a message to call me back.

My kid in the same Union will get a pension,but he went with the market deal that made 12% last year,but its still all from his employer,he pays nothing.

Just called another buddy and all he knew was that he gets $33 dollars for every month he worked for 30 years,a little over 11k a month.

I'll get an answer.

I just got called for a short trip, so I will be gone for the next 5 hours, but I look forward to learning what you find out.

but this seemed closest,and I may not be making anything on the pension money,its just saved.

I looked through the site and even did a google search in an attempt to find an annual report of the fund, but no luck. It appears there are several, one each for every district of the union, which makes perfect sense.

If you are truly curious about how a large pension fund is administered and invested, you can find info in that regard on the CALPERS 2013 Annual Report


The California Public Employees' Retirement System is the largest pension fund in the country by assets. They are invested in all sorts of various securities from Short term corporate paper to long US Treasury Bonds. They have an extensive portfolio of US Corporate and International bonds, Mortgage backed securities, international currencies, of which I am sure they have futures contracts on, and an extensive portfolio of both domestic and international equities (company stocks numbering 191 pages) which I am sure they are selling covered calls on a portion of.

I saw the Annual Report on one large pension fund that that had all of the above as well as buying commodity contracts, futures of various types, credit default swaps...in short, just about every type of security many DU'ers are terrified of, because they sound scary or they don't understand them.

Pension funds are without a doubt invested in the market. That money isn't locked away in a safe in stacks of $100 bills, not doing anything. People seem to think this money is somehow different and that it is safer.

It isn't and it's not.

plan. $132,000 per year retirement? What union was your friend in to be raking in that kind of dough? I know people who would love to be making that now, let alone when they are retired.

My dad is retired from the Steelworker's Union and gets real close to that.

The annuity is where the big chunk comes in,a buddy that retired last year just got his check,little over $650k.

The comparison could be educational.

A while back there was a poster who talked about his pension and the thread got really long and contentious.

One thing he did do was put up a link to the pensions annual report. The investment portfolio
was....interesting, to say the least.
I honestly don't think too many people looked it over AT ALL!

as the market crashed, feeling sorry for anybody with their retirement money exposed to it. I just don't know enough about how defined pensions worked to know if they were somehow outdated and no longer viable or if greedy executives salivated over those big piles of pension cash and came up with a plan to use them to prop up their stocks and become billionaires. Should probably try to find some pension reports.

Next up: privatizing Social Security!

to the trust they cannot access it for any reason other than to pay the benefits of the participants and their beneficiaries. It's not like a giant bank account the executives have access to in order to alleviate current business issues.

Whereas your defined-benefit pension is gone.

is paid into an outside fund as the Central Pension fund rather than let the corporate thieves have access to it, then it doesn't matter if the company goes bankrupt.
I worked at Hostess Cake Kitchens for 35 years and my checks come in every month.
401ks are a gift to wall street.

Personally I don't want to depend on my employers' continued financial health for my retirement.

Defined contribution vs defined benefit is a question of whether you like to hold your employer's debt or diversified equities.

my benefit amount is a little less, but I'm still getting a pension thanks to PBGC.

Personally, I don't want my retirement to be exposed to a credit risk of my employers. Not to mention that I've had a ton of them over the years (IT is like that). I guess that's a judgment individuals have to make.

One was clear enough to say that that only applies to young people.

There are two kinds of money on The Street - smart money and dumb money. Guess which yours is.

This is also a good example of why most funds move people from stocks to fixed income as they get older.

The market may go up, the market may go down, but no matter what, these mutual fund "managers" will take their 1-2% fee from you every year. That slow sucking away of your money adds up. It adds up to quite a tidy sum for them.

There are plenty of funds that use passive indexing and have an overhead of less than 0.5%. Most of them nowadays are even exchange-traded so you can buy in very small increments if you want (particularly if your broker sells partial shares).

granted there would be more if I had rolled it all over into a private account.
Here is the thing, I used to work for a consulting firm that had customers on Wall Street. When we got our 401K it actually lost money in a bull market. Unbelieveable, after a while I dropped out, why pay for the company to get more clients and put in my salary and have less come back to me. I know that Merrill Lynch was basically putting us into loss stocks to give better breaks to other clients.
I also quit the company and started my own contracting, Joined in with an accounting firm where we got to group together as a company, but act to sell ourselves and do our own negotiations on contracts, but act as if we were a large firm, We got better health insurance for less money and a great 401K that the accountant negotiated lower rates, So how much the company cares for you counts - in this case, we could have just gone to another accountant if this one didn't perform and he knew it, our company worked for us, so your 401Ks are scams because your company lets it be one. no one cares for you as much as you do.

...and the 401(k), handled responsibly, is doing quite well.

I have no problem with greater reliance on pension plans, but arbitrarily criticizing markets investments is foolish.

The two I take most exception with are

#3 Fees associated with a managed fund.... You can roll your 401k into a schwab account and buy any stock you want for a whopping $5 per transaction. Who says you have to pay fees to a money manager?

#5 Taxes.... the author is saying I will be at a higher tax base when I retire (and have no income) than I do when I am in my mid 30's with a good paying job? Uh... what?? Not to mention long term capital gains rates of 15% (or is it 20% now?) should apply... Has the author ever owned a stock for more than a year and sold it? *SMH*

The extra 3.2% supports Obamacare.

more than a few have failed.

Right or wrong, a lot of companies got out of the defined benefit pensions in the 1980s because it was increasingly difficult to predict and guarantee results. When results went south, the company had to come up with more money or face pension plan member lawsuits.

Never been in the position to make that decision, but I can see why a lot of companies did get out of guaranteeing results.

We need a total revision to things like retirement and health care in this country. I think it would be good for the citizens, our economy and companies (that like them or not, most of us work for). Well, it will be good if the right people are making the decisions.

One key point in favor of 401k plans. Very few people work long enough to become vested in a defined benefit pension. The 401k is portable from job to job.

Geronimo.

First of all, 401k plans vary widely. Companies have been known to require you put all your money in their stock, never a good idea. Enron comes to mind.

Pensions. People here often recite the myth that in the past everyone got a good pension, but the reality is that many pensions had lots of provisions connected that made them far, far less than perfect. Age and length of service were two of them. Not to mention, too many companies underfunded their pensions, then were able to get out from them entirely and turn them over to the PBSC (Pension Benefit Guaranty Corporation) and the resulting pensions were greatly reduced. I'm one of those. My pension from a company I worked for for more than ten years, is a third of what it should have been.

And then there have always been companies that never offered them in the first place. I've done a quick internet search to see if I can uncover what the maximum percentage of people ever covered by private pensions has been, at it looks like it topped out at about 40% of workers. Less than half.

Were it not for my other savings, invested largely in the stock market, I'd be still working or in abject poverty.

Even NOT counting the employer match, my 401K has done between 8-12% a year (after fees). Not bad, sez I. I'll take that over my buddies that worked at a company with a defined benefit plan that got bought out. You guessed it, they paid a lump sum to all those in the plan equal to 5% per year of current salary (some some of the old timers weren't TOTALLY screwed), but they all came up way, WAY short of where they should have been.

It has both a pension and an investment fund the employee can participate in. For example when I retire I will have about a $2,000 a month pension along with around $400,000 in the investment fund where they have matched my contribution over the years.

It's the best of both world's, a fixed pension and one can also gamble in the market with the matched TSP and later convert it to low-risk government bonds in later years before finally rolling it into an annuity for retirement payouts.

I'll be honest: with the GOP's lock on teh House, these days I feel like my 401k (or, technically, 403b) is actually safer than my pension; it's only a matter of time before those maniacs go after it in the name of "fiscal restraint."

Existing employees don't really have to worry, the usual procedure is to take it away from new hires and grandfather existing employees. Just like all federal employees on the books as of 01JAN13 or whatever are locked into the 0.8% pension contribution while new hires after that are at 3.4% or something like that now.

There is literally only ONE RULE you need to follow. Put the money in and leave it alone. Don't even look at it until you retire. There is no need to. Any example of anyone making less than 7-10% is from people who sell when they shouldn't have.

Even if you retired in 2009, after the big down turn, you only take out the small amount you need each month and the balance stays in there for the recovery.

is contained right here:

http://securities.stanford.edu/filings-documents/1053/CRSI00_01/201532_f01c_15CV01070.pdf

He was a paid consultant and member of the board even though it was common knowledge that there were unsavory characters in high places, including the CEO of one its operating companies who was convicted of murder involving a mob hit in the early 90s.

He touted the stock right up to the time it collapsed. There was a slight misunderstanding involving a $100 million shortfall in their payroll tax account.

Just because these slugs wear expensive suits, write blogs and sport hipster eyeglasses doesn't mean that they've changed their work habits.

There is no better option than investing in the corporations that fund conservative think tanks, lobbyists and politicians.

The only reason they have as much power and influence as they do is because of the diligent investments and daily toils of millions of people who care not what world they leave. As they long as they themselves prosper in the short term.

Thanks to Citizens United corporations are now people. Some of the most powerful, greedy, racist, warmongering, democracy hating, climate denying liars and cheats the world has ever known.

That people know this, and don't care, speaks volumes about them. We all have to try to exist in the most democracy corporate investors will allow us to have. Thanks to the best efforts they can muster, that is very little indeed.

Tax-deferred earnings but at regular income tax rates;
Or
Taxable earnings at long term capital gains rates. 15% is common.

They don't consider that difference in telling us all how great the 401K is.

The point is that those who start regular stock accounts and hold their stock for more than a year pay a much lower percentage on EARNINGS from that stock than those whose earnings are generated in a 401K.

reality a working stiff might actually be saving money, but by doing so might also be providing the funds for the company they work for to outsource their jobs to an overseas market.

Who is that guy? The author is apparently financially illiterate. Asset allocation in accordance with your risk profile, index funds with low expense ratios, and peace of mind. I think articles like this do more damage than people give them credit for which is interesting since I think he wants to "help people".