https://www.pbs.org/wgbh/frontline/documentary/the-pension-g...
And also in their followup, "The Retirement Gamble":
https://www.pbs.org/wgbh/frontline/documentary/retirement-ga...
Both can also be found on YouTube.
I rewatched both just a few months ago, to understand the history a bit better. The short answer is that eliminating pensions was part of a larger restructuring in corporate America, wherein major companies that became megacaps in the 20th century used the Chapter 11 bankruptcy rules as a shield to eliminate employee pensions, while the burgeoning consumer finance industry of the 1980s and 1990s was all too eager to create a new fee-generating monster in the form of 401ks.
These days, employer-matched 401ks with low-fee index funds are the only sane retirement tool available to middle-class workers, but much like US employer-sponsored healthcare, the system is about 10x more complex and 10x more precarious than it otherwise could be, and it benefits all sorts of ridiculous middleman paper-pushing rent-seeking corporations along the way. The news from IBM is ironic because employees will rightly revolt against this "pension" because now that Vanguard-style low fee funds have become ascendant in 401k accounts, a number of new unscrupulous financial actors are pitching "pension plans" to companies which are really opaque fee- and cash-grabs for employee retirement accounts.
I don't remember exact years or numbers above, but they are close enough for discussion.
Company-administered pensions offered little to no opportunity for a financial services middleman to collect a percentage, and involved employers promising their employees things that might (might) cause some pain to the employer to deliver.
So a story was made up that "you can do better on your own investing in the market", thus allowing Fidelity et al. to collect their cut, and to let employers off the hook.
And of course, like all other Republican political policy that asserts that you are responsible for yourself and nobody else is, it has all turned out swimmingly, don't you agree\?
He collects less than 10 cents on the dollar from the PBGC backstop since Eastern went bankrupt.
> So a story was made up that "you can do better on your own investing in the market"
In his case, that story was true. After Eastern, he took a job at FedEx. FedEx killed their pension plan and the employees largely had to save for retirement via 401k accounts. He lives off of that money quite nicely now. The Eastern pension buys him a nice dinner once a month or so.
Certainly the facts are not contestable: plenty of corporate bankruptcies left their employee's pension funds screwed in a way that does not happen with a 401k plan. But it didn't have to be that way, it was a choice (of our legal, political and economic system). Other countries have made different choices, for examples.
If you look at the history of the 401k, specifically, which you originally claimed was some sort of republican conspiracy to generate asset management revenue for financial firms, you'll see more Democrats than Republicans involved. For instance, the law that created section 401(k) of the internal revenue code was passed by a congress where Democrats maintained a majority in both houses, and was signed into law by a Democrat (Jimmy Carter.) In the intervening years, every single Democratic president has supported (or strengthened) the status quo. Bill Clinton signed SIMPLE plans into law, Obama championed the "MyRA" thing bolted onto the side of IRAs, etc.
How many times have you changed jobs in your career? I’m on #9.
Next month, I'll be forced to cash out the pension funds from a multinational corporation I worked for for 18 months back in the mid-1980s. $14k. I'll take it :)
The point you're making is predicated on the idea that there are only two options: company-owned-and-managed pension plans (typically defined benefit) and individually directed investment based strategies (i.e. 401(k)).
However, the problems with both of these (and yes, there are problems with both of them) can be addressed by socialized pension schemes. Make them opt-out (opt-in if you must): the vast majority of people will opt in, the plans will have enormous financial stability (some would argue based on too much economic power, which we can already see said about e.g. Vanguard), and people would not be forced to grapple with investment questions they are generally ill-equipped to answer. For those that really think they can do better by themselves - go for it.
Either taxes will have to be raised on workers or benefits cut. Social security taxes have been used as part of the current general budget since the 70a
I'm not a fan of the PR that surrounded the introduction of SS in the USA, but the technical aspects of how it was intended to work have not changed, and have worked as intended thus far. Fixing the demographic issues is relatively easy: just remove or increase the cutoff for SS taxes.
You know if you increase the amount of income that is eligible for social security that means you also increase the benefit amounts.
How is paying more taxes that the government can use for whatever it wants better than saving your own money?
All other things being equal, I'd rather not have to control it. One less web site to have to log into to micromanage something that should just be done for me. Let a index fund manager or the government get me my 7%. I really don't care at all.
I guess some people just hate on principle the idea of government doing anything for them, so for them, owning the account gives them a warm fuzzy feeling. I don't get it.
Where does it come from in a 401k plan? The obvious answer is "growth in asset values", but what does that mean? It means you took ownership of something that is worth more at the time of sale than at the time of purchase. That's an investment (aka "gambling") strategy and it MUST come with a disclaimer that returns are not guaranteed.
By contrast, socialized pension systems (of which SS is an example, albeit not a particular awesome one) are NOT investment strategies. Their goal is to provide a guaranteed income for people in retirement. It follows that they must be designed and work quite differently. One part of the strategy was termed "pay as you go", in which current workers pay for the outlays of current retirees. There's nothing inherently wrong with this approach, but as you note it can run into demographic bubbles. However, the idea that handling the one we are in/facing right now needs some sort of massive tax cut is false: just remove the cap on income subject to SS taxes, and there is no issue.
Corporate pension plans were/are a strange middle ground. Behind the scenes the fund manager would be following an investment strategy, but as far as the employee was concerned, the plan offers a guaranteed return. This was supposed to be able to work because the corporate pension plan offered a modest guaranteed return and behind the scenes, a more volatile but hopefully more substantial value was associated with the fund. This would, in theory, allow the company to make the payouts that formed part of the contracts it had agreed to with employees, but way too many companies failed to even manage that. And of course, it turned out that many had dipped into "their" pension funds to provide general corporate revenue or, even more brazenly, had simply not paid in the contributions they were contractually obliged to (I am not aware of a single company that has ever been sanctioned for this insanely illegal behavior).
Also, with my 401k plan, the amount I accumulate can be inherited when I die. I could also take some of it as a lump sum at retirement to pay off my house (hypothetically, mine will be paid off when I’m 60).
While that can work out as a viable retirement strategy for some people, it's not really the basis of a solid, dependable retirement system for a nation.
> The social security tax id capped. But so are the benefits amount. If you increase one, you have to increase the other.
I don't believe that the laws and regulations for SS require this.
Why would you assume that? Social security has been changed since it's inception, it's not written in stone. Changing the cap would be a relatively minor change compared to any changes needed if nothing is done.
I. Dont. Care.
Maybe some government retirement agent can pick the index fund. They should feel free to knock themselves out geeking out over it. They'd probably just contract it out to Vanguard or whatever. Great and fine. I don't want to do it.
Our insistence on privatizing and individualizing everything just makes more busywork for everyone. I have an HDHP and HSA and it's frankly awful having to log in all the time and look for claims and pay the doctors from it and all that on top of the Explanation of Benefits form that comes from the insurance company and the separate bills from each doctor and me in the middle having to tell customer support from hospital X to talk to insurance provider Y over line item Z arrrrggggghhhhhhhh! I just want to go to the doctor!
Somehow voters keep optimizing for the geeks. Yes, there are a handful of people out there who enjoy spending their valuable time hunched over a spreadsheet looking at investment funds. They get their way with these hyper-individual 401(k) accounts. Screw the rest of us who just want to live their lives and then retire.
and myth #5 here: https://www.aarp.org/retirement/social-security/info-2020/10...
And why would you want more of your taxes going toward current government spending that you have no control over like social security does?
This comment is laughable with it's "blame the Republicans". It's incredibly misinformed.
Who do you think manages the pension fund? Do you know how much money they make? If anything, getting rid of the pension fund eliminates the middleman.
The answer is easy - there is no long-term financial liability with a 401k match. The company gives the money and their obligations stop.
Pensions are notorious for creating future liabilities that companies can't predict. So they end up taking a hit to their financials in 2020 for a pension they awarded back in 1995.
You don’t have to be an expert. Most 401K plans have index funds and target date funds.