First of all, I want to thank Alexy, for his amazing contributions onhelping us understand pensions a little better.Pensions are very complicated to account for and comprehend. They arenot simply retirement accounts setup like an IRA or a 401K, in whichthe investor/employee allocates a portion of his/her money to investin a broad array of investment classes, such as stocks (foreign and/ordomestic), bonds (high-yield, government, international, corporate,etc.), and cash. Over the course of several decades of employment andcontributions, the investor/employee retires, and he/she lives on theinvestments and capital gains. THIS IS SO SIMPLE TO UNDERSTAND, andthere is nothing abstract about this concept at all. Moreover, thisscheme cannot ever be bankrupt, since no liability is incurred.,On the other hand, pensions are different: Today's wage-earners payfor today's retirees. Therefore, demographic pressures such as agingof a population, which is occurring in Western countries, can putgreat strains on pension schemes such as Social Security since feweremployees' contributions are funding their pensions. Moreover, thissetup has the ability to become insolvent.From what I understand, one benefit of pensions as opposed to aretirement savings system is that: " a government-run 401(k) wouldhave [meant that employees approaching retirement in the near futurewould see] next to no benefits. So US Government created a socialinsurance program that provides a rolling income shift betweengenerations of workers."I believe, based on this assertion, that pensions seem to allow agenerational income shift. What problem does this solve? From myvantage point, this creates so much disadvantages and complexities inthe system.I took a finance course regarding pension and health benefits ofAmerican employees at some of the most recognizable names inindustry. Because their pension obligations were so high, that thisactually created a huge liability which made the company have aNEGATIVE...

Nope, there are just some variations on how they operate.Some of them are just that. In fact many of them are just that.Yes it can, most obviously when it invests in some operation thatbecomes worthless. That does happen with some company pensionschemes that invest in that company. Happened with Enron etc.Thats not what bankruptcy is about.Plenty of them arent.That isnt how all pension schemes work, most obviously withdefined benefit schemes so common with govt employees.Yes, but thats easy to handle just by increasing the contribution rate required.Nope, because the detail can always be varied,most obviously with the contribution rate required.Its not an assertion, its a fact.Yes, there is certainly an effect like that, particularly as the scheme starts.It solves the problem with those who are destituteor dont have enough to live on in retirement.Its only a short term effect as the scheme starts up.Yes, and thats why there has been a move to what you call savings schemes.And you dont...

Some terminal fuckwit claiming to beBill Reid wrote just the puerile shit that any2 year old could leave for dead, as always.

So why are pensions to current retirees funded by current employees?

Apr 29, 2010 63 Replies

Rate this thread:

Bill Reid 16 years ago

So, what are your opinions on the BP oil spill? I'm sure you have an interesting take on this mess. Please share, if you have a minute.

Vote

Bill Reid 16 years ago

I knew it..."Sod Peed" has no ability to post anything except repetitive dumb insults about people being "pig ignorant"...he could have said what I, as an intelligent human, would have said if asked: "I think BP should make whole all the people who have been harmed by this spill and that while I agree in general principle with a ban on deep-sea drilling because of an obvious inability of the industry to guarantee the prevention of catastrophe's of this nature, I also agree with the judge that overturned Obama's moratorium as being overly broad and more punitive in nature, because I believe the industry can prevent catastrophic spills at depths included in the moratorium."

See how easy it is (for me) to make an intelligent post? Why can't you do the same? If you aren't intellectually able, maybe you should consider not posting at all.

Vote

Rod Speed 16 years ago

Some terminal f****it claiming to be Bill Reid wrote just the puerile s*it that any

2 year old could leave for dead, as always.

Vote

Rod Speed 16 years ago

Some terminal f****it claiming to be Bill Reid wrote just the puerile s*it that any

2 year old could leave for dead, as always.

Vote

Join the Discussion

Have something to add? Share your thoughts — no account required.

Didn't find your answer?

Ask the community — no account required