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Comment by afjl | Hacker News Reader

What about the risk that the government slashes your benefits?

Even if you expect to take a haircut on your pension, it's still a good idea to diversify your retirement investments, for the same reason that you should invest into both bonds, and stocks.

If you retire during a recession, your planned 20 years of 401K runway may not last you more than 12. Or you might end up living longer than 20 years. Or both.

With a guaranteed payments pension, you will continue receiving benefits as long as you live. This aspect of it wont matter to you if you fall over dead at 68, but will matter greatly if you end up living longer than planned.

Right now, less than 5% of my retirement savings are going towards a pension (Social security). I would be much happier if that number (And the expected returns from it) were closer to 25% - and that's with the expectation that SS payments will unexpectedly drop in the future. Having an investment instrument that will pay me until I die is great for diversifying my portfolio.

A 401k should mostly be bonds and cash equivalents when you retire.

And if the recession hit a few years before you retire, your portfolio will never get a chance to recover from that hit. Your 20 years of runway becomes 12.

I mean you can move the goal posts here... yes a 401k is risky.

I can fudge the numbers a bit - but you only get one shot at this sort of thing, though, and you can't predict the future. You either take risk with your 401K, or you keep too much of it in bonds, and lose it all to inflation.

Thanks to that, a fixed benefit pension as part of your retirement strategy is much more fiscally responsible than going all in on either a 401K, or a pension.

Even if they do you can also vote in someone next time to restore your benefits. I'd rather have an option on an indefinite benefit vs a fixed one.

Pension isn't infinite though, as you will die at some time, and the parameters on how long people can live are quite well known. For example, you should always take $2M up front at 70 instead of $50k per year indefinitely because you simply can't live long enough for the latter option to ever come out ahead.

* with the current state of medical science.

I suppose I agree on a personal level, but my concern is moreso with the structure of funding pensions vs funding 401k's.

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