Generally, people relying on the moderately funded 401(k)-type plans will outlive their assets

[NNN0LHI]

http://oncampus.osu.edu/2009/12/defined-benefits/

Defined benefit system should remain core of retirement plan

<snip>A significant question being raised is if the pension systems should be completely replaced by a defined contribution system, such as a 401(k) or 403(b) plan, where much of the private sector has moved.

It is in Ohio State’s interest to have a strong benefits package to attract and retain the best employees, who are the talent backbone of the university’s success. In our view, the best policy for the public and as an employer includes maintaining the current defined benefit systems as retirement plan options, along with the defined contribution options that also are available. The defined benefit system is the system of accruing a monthly pension benefit versus simply accumulating a cash account (defined contribution).

The move to completely replace the defined benefit systems by defined contribution plans is perpetuated by the notion that taxpayer dollars will be saved. But the reality is that two-thirds of the pension benefits paid out come from investment returns while the remainder comes from employee contributions.

Retirees in a defined-benefit plan can count on a steady stream of income the remainder of their lives. Generally, people relying on the moderately funded 401(k)-type plans adopted by many private employers will outlive their assets.

[Curmudgeoness]

1. And exactly who is that person who thinks otherwise?

I don't know whose brilliant idea it was to start the 401(k) type pension plans, but from the first day I heard of them, I thought it was doomed to fail. And at some points in time, like now if you are invested in the stock market, you could be in serious trouble. But even with all your principal safe, the interest earned will not be enough to buy a week's worth of groceries.

[zipplewrath]

2. Was sold as a modification to SS

I was just getting into the working world when IRA's and 401K's were getting their start. The sales pitch to use was that "social security may not be there, it won't be much if it is, and this is a way to supplement that income". We still had defined benefit retirements (I still do, but I'm one of the last). Somewhere in there, mostly during the dot com boom when folks were switching companies every 2 years, the 401K started being an sold as an alternative to a defined benefit plan. I thought that was strange because an individual would be hard pressed to save enough to equate to any decent defined benefit plan. It seemed possible in the '90s when stocks were rising fast, but any long term view made it hard to see how it was going to work. The whole idea of a defined benefit is it is a bit like insurance. We all get it, some will die sooner, some later. By sharing the cost we all benefit. Having to save all that money oneself makes the cost much higher.

And I think the proof is in the transition. Companies started trying to "buy out" folks from their Defined Benefits. And when they did, the money that folks would need to be given to equate to the defined benefit was huge. There were lawsuits from folks over 40 that what they were being offered wasn't even CLOSE to what the defined benefit was worth.

My father got a "lump sum" payment when he retired, and he was one of the last to do so because it was a huge sum. Defined benefits are a vastly better deal for the worker than 401K's or similar vehicle. Just don't have the company "run" it. Make 'em put money aside, that way when the company goes belly up, you've still got something.

[walldude]

16. I don't know much about finances.. enough to get by

but when they came to my old job with that 401k shit I smelled a rat. Forcing me to invest money? Paying a fine or a fee if I wanted or needed some of MY money? No thanks. I'll get by without the help of Wall Street. If I want to gamble I'll go to Vegas.

[dkf]

3. Most of the defined benefit plans are closing.

They are dinosaurs.

[Hannah Bell]

5. "dinosaurs" = buzzword. the ruling class doesn't want to pay for them, that's all.

[RaleighNCDUer]

7. Dinosaurs, as defined by the companies paying them,

not the workers receiving them.

[Commie Pinko Dirtbag]

10. Just like other quaint antiquated things like minimum wage, paid vacations, and overtime pay, huh?

Behold the Brave New World. Everyone for themselves, and the State for us 247 members of the Nomenklatura! :eyes:

[Brickbat]

11. Snort.

People got them by fighting for them, and then corporations and politicians completely undermined and dismantled them. We can get them back by fighting for them again.

[county worker]

14. Not ours. I don't understand why you say it is a dinosaur.

We and the employer put in the money and it is invested for us. When we retire we get a certain monthly payment based on years worked and the last salary level before retirement.

Almost everyone working for a major corporation had the same thing if they were in a union. It is a good thing when people do not have to live in poverty in their old age.

Most young people will live in poverty simply because of people with your kind of thinking. It's a shame!

It never ceases to amaze me to see that the things we as progressives want for ourselves were once things that we use to take for granted. To hear a progressive call for cuts in retirement benefits congers up in my mind someone willing to cut their own throat.

[dkf]

15. Believe me it is not a trend I like.

I just keep seeing it.

[Commie Pinko Dirtbag]

22. I respectfully reserve the right to deny your request. -nt

[dkf]

24. I'm sorry... what am I requesting?

[pscot]

4. You don't have to outlive your assets

Just keep your gas bill paid up.

[Curmudgeoness]

6. You make a point. Actually, a friend who works with the elderly

pointed out to me that there is a lot of help for the elderly who do not have sufficient assets. And the more I look at the reduced rent housing, and utility help, and all the other options for retired people, I realize that she is right. Don't spend your whole life getting ulcers worrying about something that may never happen to you.

[SoCalDem]

8. and it's a pretty cold-hearted child who will not help Mom & Dad

It can be as simple as buying a bag of groceries for them when YOU shop, helping them stay on top of their monthly bills, coordinating doctors'; appointments, etc. (if they live close)

Doing necessary maintenance on their home or helping them prep it for sale & a move to a smaller, cheaper place

or if it's a large place, perhaps cohabiting with them as they lose the ability to "do it all".

If Mom and/or Dad are indigent, it may just be the time for the grown children to take them in. It sets a good example for the grandchildren to see their parents helping (and the kids, as well).

Many elders are ashamed to ask for help, or deliberately hide their need of help. It's up to the grown kids to ferret out that information, and then step up to the plate.

We always joked to our boys.."Two of us managed to care for THREE of you for your first 20 years, surely THREE of you can help two of us for our last 20":rofl:

[Curmudgeoness]

9. I suppose that I am up shit creek without a paddle, but

I am not going to concern myself about the future yet. Hell, enough to worry about day to day. But I have no kids, so have no backup. And who knows, even if I did, they would probably be the cold-hearted ones.

I say find a state that has good programs for the elderly and move there.

[NNN0LHI]

13. The best gift parents can give to their children is to not be a burden on them

My mother constantly has work for me to do around her house to save her a couple of bucks. The exact same kind of work that I pay someone to have done at my own house. And she is loaded. She wants to save any of her extra money to go pump into slot machines at the local gambling casino.

Don

[SoCalDem]

17. Most parents try their hardest to NOT burden their kids

but there are always those who will take advantage :hug:

I think there are a lot of older folks who are ashamed of admitting their poverty, and too many "kids" who are willing to "not see" it:(

My mother in law was a prime example of this.. Until we HAD to take over, we never knew that her SS payment was only $232.00 a month:cry:

She always presented herself as being "comfortable" & before her stroke she was able to augment her income by babysitting, but once her health failed, it became all too apparent how touch & go her income had been for a very long time.. Of course we lived in California & she lived in Kansas, so we did not see her all that much, so we truly did not know.

[NNN0LHI]

18. Only thing my mother is hiding is her money

Her mother was the same way. Always looking for a handout from the kids and after she died come to find out she had more saved up than all the kids had put together.

Maybe living through the great depression did it to them?

Don

[Lance_Boyle]

12. People who fund their 401K plans moderately will have to deal with that.

I have never bought into the planning tools that tell you to plan to pull in less than your current monthly income from your retirement plan. I fund my 401K to give me retirement income far in excess of what I now take home. I guess I have an extravagantly funded 401K. But I still don't plan to retire extravagantly.

[dkf]

19. Far in excess? Wow. I'm projected ok but I'm doing it to 95 years old.

Life expectancy is huge in these calculations. I think I had to use social security to get there too which isn't how I'd prefer to project.

[Lance_Boyle]

20. Got to - barring weird health shit (which we will probably all end up having anyway)

life expectancy for someone who is 40ish now goes into the 80s and beyond. I gave up on trying to retire early when I figured out that even retiring at 67 I will have more years ahead of me than my grandfather who retired in his 50s (relatively, of course - dear deceased grandpa obviously has no more years). Its the weird health shit that becomes a concern. And I figure if it takes me down, then my survivors or charities named in my will score big. Win/win.

[dkf]

21. All my grandparents hit their 80s, with one in the 90s and one hitting the century mark.

I have got a long way to go.

[Withywindle]

23. Hell, I've already outlived most of mine

and I'm only 41.