Pension plans as they were are still kind of bad because they could be mismanaged in a variety of ways.
Pensions are kind of always problematic because you take control away from people and give it to people with misaligned incentives.
It's the same if you give people control over their own retirement because they can not contribute or mismanage how the money is invested. Defined contribution pensions are maybe an improvement on this because at least you know there is money there and can have a regulatory framework that is simple and heavily restricts how the money can be used. I would really like to see broad market index funds only. Dumb money should stay dumb.
Maybe if you pull the responsibility up to the federal government you minimize the risk of mismanagement, but it's still pretty large.
Seems like we are doomed to pick an option that is still risky and it's every person for themselves. You need to super save and not rely on any framework provided by others. And this is where 401ks shine. Sure I am stuck relying on the stock market, but I think the distribution of outcomes there are more in my favor than if it were managed by someone else. Whatever is in my 401k (or IRA or whatever) is owned by me and is heavily diversified.
> Pensions are kind of always problematic because you take control away from people and give it to people with misaligned incentives.
Maybe I'm the weird one, but I don't necessarily want control of my retirement fund. My primary requirement is that it exists when I need it. Somehow the financial industry convinced the public that being able to micromanage their retirement investment and pick their own stocks and mutual funds is somehow beneficial. I can probably count on one hand the number of people I know who find this kind of micromanagement interesting.
I just want "money goes in" and "enough money eventually comes out" and I don't think I'm alone in that. You can accomplish that with a well-run pension, a well-run government plan, and so on. Lots of options that don't involve me having to decide between stock and bond funds.
Having watched a close friend of my dad's sell at the bottom in 2007-2008 after he had retired, I understand your sentiment.
However, before the advent of discount brokerages and widespread 401(k) plans investing really was only for the extremely wealthy and inept fund management - resulting in extremely high expense ratios - was rampant. Now investment is more accessible and ETFs are offering near-zero (or actually zero (!) - see FNILX) expense ratios on the strength of the economy, which has been a net win for a larger segment of the population than the 0.1%. We're up to 20% now!
I would like to see a much larger percentage of the population to be able to get in on this opportunity. Doing away with wealth and income inequality will get us halfway there. Trust-managed investing addresses what you're asking for, where a company manages your investments and retirements for you at some level of expense ratio. (These companies exist today for retirees.)
>I just want "money goes in" and "enough money eventually comes out" and I don't think I'm alone in that. You can accomplish that with a well-run pension, a well-run government plan, and so on. Lots of options that don't involve me having to decide between stock and bond funds.
Pensions are kind of always problematic because you take control away from people and give it to people with misaligned incentives.
It's the same if you give people control over their own retirement because they can not contribute or mismanage how the money is invested. Defined contribution pensions are maybe an improvement on this because at least you know there is money there and can have a regulatory framework that is simple and heavily restricts how the money can be used. I would really like to see broad market index funds only. Dumb money should stay dumb.
Maybe if you pull the responsibility up to the federal government you minimize the risk of mismanagement, but it's still pretty large.
Seems like we are doomed to pick an option that is still risky and it's every person for themselves. You need to super save and not rely on any framework provided by others. And this is where 401ks shine. Sure I am stuck relying on the stock market, but I think the distribution of outcomes there are more in my favor than if it were managed by someone else. Whatever is in my 401k (or IRA or whatever) is owned by me and is heavily diversified.