That is a qualitatively different, but it is almost insignificant compared to the quantitative difference.

Which is that defined benefit pensions were funded with something like 20-25% on top of wages, paid by employers, and defined contribution pensions often get 1/4 from the employer (4-5%) as defined contribution pensions did.

The enormously reduced cost to employers is 90% of the matter, and only morons and cheats discuss side issues as the change of funding source when the big deal is the change in the amount of funding.

If defined contribution pensions were funded as much as defined benefit ones they would not be too bad; but we are not comparing a 20-25% employer contribution to a defined benefit pension with a 20-25% employer contribution to a defined contribution one, but to a 4-5% one in the latter case.

That is both the big problem with defined benefit pensions (for employers) and at the same time with defined contribution pensions (for employees). That DB ones are very expensive for the employers to fund, and the DC ones are very expensive for the employees to fund.

Because it is easy for the losers (employees) to see how much a DB pension is worth (k% x final salary x years of service) but it is easy for employers to conceal how little a DC pension in (because employees don’t know usually how much the DB pensions costs in present terms).

In the end good pensions are for the few winners, and the many losers will spend their retirement in unheated sheds eating bread and milk.

There certainly needs to be tighter rules in place over what sort of investment strategy is appropriate for pension funds but we also need to recognise that defined benefit pensions are like blank cheques. We have no idea how long people will be living in 10 years time. Actuarial predictions are just guesses. Even being out by a few years adds huge costs to your scheme and there is simply no way to calculate this in advance.

One thing is certain, we need to contribute much more and work for longer.

What is Team-Obama exactly doing ?
Pump in massive amount of funds in these toxic assets and do it without having any accountability or transparency.
Why?
1. The assests are really cheap at the moment
2. Help their friends in wall-street who provide the money for running and winning elections

How to make the plan work?
People have lost the hope in the system … just add oil to the fire
by getting all the leading economists and traders to bash the government programs and make people believe that the programs are unfair,unjustified and ineffective. In short term it will create even more negativity and maybe more bailout funds or some mini-bubbles or mini-rallies as we are experiencing right now !
and very slowly and discretly these economists will start making statements which would approve these programs partially and one day one of the mini-rallies will form the next big rally and very slowly the US govt will offload everything bought during this period with a huge margin.
The end result, NULL fiscal deficit and govt liabilities which has mounted for quite a few years because of the wars and indiscriminate spending …

Why is US govt playing this game ?
Was there any other option … other than insider TRADING and market manupulation at the macro-economic level !

who gains and who losses?
gainers: US treasury, wall street, central banks and offcourse these economists who are bashing these plans!

loosers: China, India and all the third world countries, retail investors in equity,real estate the world over …

why no one would complain: because the looses are already done, jobs are already lost and when things improve in a few months/yrs no one would complain

So did most ‘professional’ money managers.

‘Pensions are a reflection of our society. If you dismantle DB plans, we mind as well live in a state of total anarchy where the weakest members of society, such as the poor and disabled, are left to fend for themselves.’

Pensions currently only benefit the ‘professionals’ managing them. Is the sum total of assets in pensions today even worth the contributions that have been put in them? Society would be better off if pensions were eliminated.

>>I have been studying financial markets for over 12 years now. I have sat with the best hedge fund managers in the world and I have also seen anonymous prop traders that you never hear about who have made millions eating what they kill.

It would be nice if we can teach everyone to be like Jim Simons, George Soros, and Monroe Trout, but this is a pipe dream.

The markets are too difficult nowadays, even for professional money managers. Do you really expect Joe & Jane Retail to handle their own retirement fund?

Some have done well because they used common sense and remembered the basic tenets of asset allocation, investing in both stocks and bonds, but most people got slaughtered.

These markets are ruthless and unless you have tried making money solely by trading for a living (I have and it was the hardest and most rewarding experience), you will never understand how difficult it is to consistently make money.

I can teach people technical analysis, fundamental analysis, economic basics, but I can't teach them intuition and when to go for the kill in the stock market. That is either in you or it isn't. For most people, it isn't.

That is why safety nets exist and that is why we need to revamp our defined-benefit pension plans so that they benefit the many, not the few.

We need to ask some tough questions about pensions and the first one is why do they exists in the first place? For pension fund managers? For hedge fund managers? For private equity managers? Or for those hard working people who contribute to them?

Pensions are a reflection of our society. If you dismantle DB plans, we mind as well live in a state of total anarchy where the weakest members of society, such as the poor and disabled, are left to fend for themselves.

That is not a society that I want to live in.

Leo

The third party solution seems to draw nearer every day — the Pitchfork Party, that is.

Vinny

If we continue the way we’re doing, with the banksters in charge, nothing will be left by ashes for any of us.

Vinny GOLDberg

What you are saying IS elitist. Assuming it doesn’t go bankrupt also, SS does provide a minimum safety net for folks. The whole point about being an adult and citizen is that WE ARE SUPPOSED to be responsible for ourselves. This attitude that the average person is incapable of taking care of himself or herself is absurd.

Are there folks who demonstrate a lack of ability here – absolutely. If they are truly incapable, then they should be wards of the state (and no longer able to vote, as they have demonstrated that they are not adults and not responsible citizens). If they are capable but refuse to act wisely (the majority of folks in this area) then they deserve what they get.

We need to ensure that education is available, so that the average citizen can make an informed decision, and then apply the “big-boy” principle (they are responsible for their choices).

The problem with any kind of retirement plan is that there will always be a temptation to over-commit and under-prepare. Either the company will skimp on contributions to try and save money, or money managers will gear up for short-term profits at the expense of long-term stability, or the government will become over-committed to massive entitlement programs that it later cannot afford, or some combination of the above. Having family members care for their own is the only solution that ensures that the elderly are cared for in a consistent, reliable way.

The contention to that approach–and the reason that Social Security was instituted in the first place–is that some do not have children, and some families cannot afford to support their parents. But those are exceptions, not the rule; for virtually every family that I know, the children would be capable of supporting the parents, albeit with some sacrifice involved. We should not be letting the exceptions dictate the rule. It may be necessary to have some sort of bare-minimum government support for the elderly who have no other resources, but the most viable solution is a culture shift where expectations are set that the younger generation will care for the previous generation, as it has always been.