Comment by shorttime | Hacker News Reader

Comment by shorttime | Hacker News Reader

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If the book I'm reading is to be believed, pensions were paid for by the company with money that would have went to the worker, if not for the pension. This money would then be invested over the career of the worker, similar to a 401k, but the risk is on the company to manage - not the worker. The pension to 401k transition simply offloaded the risk of financial maintenance to the worker, rather than the company. Salaries, supposedly, adjusted accordingly when 401k's came around, which is a whole story in itself. Originally, 401ks were for executives seeking tax-differed income from the company and it morphed in the 80s to become what we see today.

A company, even a fairly big one, can go out of business. Also, most companies are not in the business of managing investments. They are in the business of selling shoes, or oil, or internet ads.

There are companies that are in the business of managing investments for the very long term and are regulated so as to minimize the risks of bankruptcy. You or you company can incrementally buy a pension from such a company in the form of a deferred annuity.

The only disadvantage to a defined contribution plan with a deferred annuity option is that you and your employer can't mutually pretend there's such a thing as a free lunch in the form of risk free investments with eight percent returns. But on balance I'd consider that a good thing.

You're mostly right, but it's also the spreading of risk across many employees (including future employees, not even hired yet) which make pensions viable.

> If the book I'm reading is to be believed, pensions were paid for by the company with money that would have went to the worker, if not for the pension.

This is evidently not true, as employers did not, when discontinuing pensions, add equal economic value in other compensation. Pensions are a retention program as well as a compensation program.

What's the name of the book?

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