Comment by icelancer | Hacker News Reader

Comment by icelancer | Hacker News Reader

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These pensions were bankrupt the minute they were implemented - the capital appreciation rates were completely insane to start, and have only looked worse as time rolls on (which, I have to stress, is extremely tough to imagine). Delusion around pension portfolios eclipses all but the most insane crypto scams.

Quite a bit of my university work in the early 2000s revolved around studying and modeling pension-type retirement plans, primarily in the United States (Chicago and Philadelphia mostly come to mind), but a little in foreign countries. While EU pensions tend to be in worse positions, it's a distinction without a difference: Pension reform is basically impossible. Catastrophic bankruptcy and refusal to pay benefits is coming to a theatre near you, because the political will to even begin meager cuts (and so-called "drastic" cuts are indeed merely meager) does not exist.

Politicians who propose meaningful cuts to pensions are guaranteed a single term in office while the candidates waiting in line promise to keep the Ponzi scheme going.

Philadelphia's pension "scheme" is crazy and borderline criminal how its implemented. Pay days on retirement date based on salary in the past several years, absolutely rampant overtime fraud, cronyism abound everywhere. There are plenty of stories of people retiring milking tens of thousands of dollars from fraudulent overtime, getting a one time payment on retirement in the hundreds of thousands, and then getting a pension higher than their real salary.

I support pensions, but this has to be done at the federal level, and funded heavily through taxes and pro-natalist policies to keep demographics correct. Cities, states, counties and companies are not able to adequately fund defined benefit pensions.

A federal system sounds like a horrible idea and a really dangerous single point of failure. The consequences of such a system collapsing would be apocalyptic, and forcing everyone into a single system without competition all but guarantees corruption and mismanagement. Social security is bad enough, please don't expand it.

The federal US defined benefit pension already exists, it is called Social Security.

I did say "Social security is bad enough, please don't expand it."

Luckily, most Americans have pensions outside Social Security, so you won't end up in a situation where nobody has a pension if it collapsed. It would still be bad, but not as bad as if the federal government had a pension monopoly.

I have heard these schemes and problems being perpetuated by agencies like the police, where they have terminal salary-based retirement benefit plans. (or in the style of, "your last 3 highest paying years") The officers conspire to get the retiring man as many hours as possible in his last years, overtime etc. Or more subtle things like, every road construction site has to have a police officer on duty. It's a bad oversight / policy by the government that allows this to happen. And hard to change politically.

Cops are one of the offenders, but make no mistake, teachers' unions are up there as well. There's no one particularly bad abuser of the pension systems; the system itself was set up by either innumerate or corrupt individuals. Or perhaps both.

If I was a pension rep or director for the cops, teachers, firefighters, or whatever, best believe I would maximize my members' benefits to the maximum extent the law and guidelines allowed. That's really all that is happening with these unions. Sure, there is some corruption going on (when isn't there in any large organization, much less government agencies) that isn't helping matters, and there are idiots that are making things worse. But these issues are in the seriously tiny minority of the real problem: People who could not do math properly or were corrupt from the get-go set up an insane pyramid scheme built on ridiculous population growth and capital appreciation models, and no one wanted to stop the music for decades on end.

The most likely scenario by a WIDE margin is that pensioners are wiped out or forcibly restructured in a court of law, getting a small reduced fraction of their promised ("guaranteed") benefit. It just is. In America, we don't fix gradual issues - there is simply no incentive to do so. We ignore them until they blow up and then we do something about it. This sounds stupid, but it's perfectly rational on an individual level.

> Pension reform is basically impossible.

That probably depends on the culture.

My experience from Finland is that there is always a pension reform going on, or at least people are planning the next reform. It's been recognized for decades that the pension system is unsustainable, and reforms have gradually made it more sustainable. Pension growth is now based on a mix of price and wage growth, the initial pension is based on lifetime contributions rather than final wages, retirement age automatically follows changes in life expectancy, and so on.

Older generations certainly got a better deal, and young people are always cynical. But as people age, they tend to gain confidence in the system, as they have seen it change over their careers.

Finland is in a much better spot than most US/EU pensions due to incredible natural resources per capita, high trust society, and low discretionary spending in non-public welfare areas. Some reform is probably required but nothing compared to the catastrophic situations in the US/EU. Fortunately.

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