Quote:
Originally Posted by Slava
I just think that looking at your participation in a DB pension from a rate of return perspective id the wrong metric though. It implies that you could do better on your own and frankly speaking, I'm not sure that a lot of people could. Sure, on a pure rate of return it isn't rocket science, but that pension that is guaranteed income for as long as you live is a significant factor for retirees. Its removing the longevity risk for people and that is an enormous hurdle both in terms of them physically not outliving their money, but also in the sense of the psychological pressure that aspect causes for people.
And, lets not kid ourselves, to meet that return and meet that outcome requires saving discipline that is simply non-existent for a lot of people. The maximum contribution today is about $3800/year and if that didn't happen automatically for people, what percentage of people would put that away? How many people would think "it's only $3800, so next year I'll just save $7600 because I really want to go to Mexico this year?" I suppose what I'm getting at here, is that there is a societal benefit to this program as well as the benefits for individuals.
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Oh for sure, that's why I said rate of return is a bad way of looking at the issue. It's good that it's mandatory because it prevents most old people (even those who make consistently bad decisions) from being poor. But I think the facts that the pre-1990 workers elected not to pay for their own pensions and got those of us now to pay for theirs plus ours is a legit gear grinder.