[robotburrito]

Why did pensions go away? Is the dynamic nature of 401ks that much better? I always found it quite strange that not only am I expected to be an expert in my field, but also must be a near expert in financial investing to not end up being homeless in my old age.

[pixelmonkey]

This was covered well in a PBS Frontline documentary, "The Pension Gamble":

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.

[mhewett]

My wife worked at Boeing for seven years in the 1980s, in management. We tracked down her pension recently, hoping for a huge payout after it had been invested for 35 years. It turns out that she will get $96/month. We are very disappointed in the Boeing pension managers.

[bluGill]

Pensions went away because for most they were worse. If you stay at the same company from 25 to 65 and live to 105 they are better than a 401k. However if you found a different job (including because you got laid off) the amount you got was severely reduced (not to zero, but my dad could have got $.75 month starting at 65, if he had joined a pension at 22 when he started in 1975 until 1985 when the nearly bankrupt company finally laid him off. In 1985 he got a job with a company that instead offered a 401k, and there got a small nest egg. If he had stayed at that company until 65 he would have got something like 1000/month, which sounded great in 1973, but there was a lot of inflation in the next decade.

I don't remember exact years or numbers above, but they are close enough for discussion.

[PaulDavisThe1st]

Republican political philosophy.

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\?

[marcus0x62]

They also involved a not-insignificant risk to the employee in the event of bankruptcy, or losing their job before eligibility for full retirement. A close relative put in more than 20 years at Eastern Airlines.

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.

[PaulDavisThe1st]

This is an issue with the way corporate pensions are/were run, not the basic concept. The fact the the pension fund members got shafted in favor of other creditors is a detail that also stems mostly from, well, not exactly Republican political philosophy, but capitalism itself (in the sense that it is a system predicated on the concept that the rewards of human ventures go primarily to those who invest capital rather than labor or ideas).

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.

[marcus0x62]

Sure, if the facts were totally different, the resulting circumstances would be different as well. But they aren't, and your thesis that these circumstances were principally caused by Republicans is supported by no evidence that I can find.

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.

[scarface_74]

Yes because it’s much better to let the company be responsible for your retirement and depending on the viability of your company.

How many times have you changed jobs in your career? I’m on #9.

[PaulDavisThe1st]

I'm nearly 60. I've been self-employed for the last 25 years. I worked at precisely two jobs that offered any sort of pension funding at all.

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.

[scarface_74]

Because Social Security has been so well managed…

[PaulDavisThe1st]

How has it been badly managed?

[scarface_74]

Really? In the next 20 years less money will be taken out for current employees than needed to meet current obligations. The “trust fund” is a lie.

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

[refurb]

> Company-administered pensions offered little to no opportunity for a financial services middleman to collect a percentage

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.

[barryrandall]

Changing from defined benefit plans (pensions) to defined contribution (401k/403b) plans shifts the risk of poor investment performance from the employer to the employee.

[scarface_74]

Really? You would want your retirement tied to your employer? You would want to have to stay committed to one employer your entire career?

You don’t have to be an expert. Most 401K plans have index funds and target date funds.

[Rebelgecko]

Pensions are expensive and susceptible to interest rate swings. Defined contribution plans like 401ks are easier (for companies) to budget for.

[dfxm12]

The American experience is not designed for people like us, workers, to succeed. It is designed for a capitalist to extract more capital from us.