Re: The end is nigh

David Cameron Staples <staples@xxxxxxxxxxxxxxxx> wrote:
Combine with that the government attack on the very concept of 'pensions'
in UK and AU. (As I understand it, unless you are a veteran there never
has been that concept in US, certainly not as the English and Aussies
know it. I could easily be wrong.)

I'm pretty sure that until the 1930s, when Social Security started,
there wasn't a general old-age pension that was paid out by the federal
government and collected via payroll taxes. Some companies had pension
plans, but there wasn't one available to the public at large.

(You can get Social Security and a company pension at the same time. You
can even have a regular job while you're getting SS, but if you make
over a certain amount of non-SS income, your SS benefits get cut back.)

From maybe WWII through the 1970s, most pension plans offered by
companies to their employees were what is now called (I think) "defined
benefit" plans: "Work here for X years and retire at age Y with Z% of
your salary (possibly with cost-of-living increases) until you leave the
planet." For this to work, companies had to have a large pile of money
in the pension fund; someone at the company was in charge of putting
the money in low-risk investments. The companies weren't otherwise
supposed to touch the pension fund, but lots of CEOs raided the pension
fund and it didn't turn out well.

(The federal goverment does something kind of similar with the SS money.
All of it that comes in is going to go back out again at some point in
the future, and should really be written down off to the side somewhere.
But they like to put it in the main budget so the balance *** looks
better. They also make themselves loans out of the SS money.)

Sometime in the 1980s, the idea of "defined contribution" plans became
popular. "Put up to X% of your pre-tax salary (sometimes with a company
match) in this set of stock market funds. When you retire, you sell the
stocks for whatever you can get, pay the tax, and live off of the money."
There are $smallnum funds offered in the plan; usually you get a spectrum
from "unless the sun explodes, you'll make a couple of percent" all the
way to ".com". You get to choose how much of your contribution goes
into each fund, and you can change it around fairly often. You pay no
tax on the money you put in; you pay it when you cash in the stocks -
the idea is that then you'll be in a lower tax bracket anyway and/or can
afford the tax more readily. A 401(k) plan is an example of this, but
there are others.

The latter kind are much cheaper for companies to offer. The former
kind are what the large companies that still have them (notably the
airlines and automakers) are trying to get out from under, usually by
dumping them on the federal government. Some people are reasonably
smart about what funds in their 401(k) that they put their money into,
and do well. Other people put all of their 401(k) money into tulip
futures or whatever and lose out.

Howard and Blair, and those before them, have spent most of the last
decade or two talking very loudly about how you couldn't rely on
government handouts, and the pension is a government handout

This is happening here as well, but maybe only for the past decade or
so. I kind of believe them; I'm in my mid-30s and I have more or less
written off all of the Social Security taxes I've paid. I might get a
few years' worth of payments if I'm lucky. I work with people are in
their early 20s and if they ask I tell them that IMHO they will never
see any of the Social Security money again. Part of the reason is that
old people don't have anything else to do other than to go out and vote
a lot, and they will always vote to keep or increase their benefits.

Not that I'm cynical.

Somthing about "the power of accurate observation", I think.

Matt Roberds

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