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Comment by Pet_Ant | Hacker News Reader

The real problem is when they go from retirement-age-but-with-working-bodies to retirement-age-and-frail-elderly . That will be a real tragedy of poverty, suffering, and neglect.

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We had pensions. And then everyone was told to use a 401k. And those previous corporate pension contributions became shareholder profits. And then wages stagnated and many people couldn’t afford to or didn’t save in retirement accounts. And now half of everyone over 55 has no retirement savings per the GAO and will rely on Social Security, Medicare, and whatever income can be scrapped together when you’re elderly.

It’s going to be a shit show. But heh, at least those pesky pensions went away, amirite? Insolvent pensions are the least of your concerns when tens of millions of older Americans have a vote and are collecting an entitlement till death.

There were a lot of negatives about pensions; employee mobility and companies trying everything possible to weasel out of promised benefits being the biggest ones.

The problem isn't retirement accounts, it's a lack of mandatory funding by employers.

A simple solution would be mandatory 401k contributions by employers for all workers.

Even a 2500/year contribution for a worker will yield almost 200k at a 2% annual return on an average and almost 500k at a 5% return over 45 years. While by no means could independently support a lifestyle, it can definitely supplement social security. The burden for workers to save would be significantly lower.

Australia’s Superannuation concept is a reasonable model imho.

Not only must employer contributions be mandated, but it must be very hard to get access to the funds before retirement. Otherwise, they’re just cashed out. You also have to have strong guardrails around fees and fiduciaries so it’s not a big pot of money for finance to leach off of.

https://en.wikipedia.org/wiki/Superannuation_in_Australia

Also agree with Retric’s sibling comment.

At that scale there’s no reason to use 401k style personal investments that’s just pointless overhead and risk. Social Security tracks individual contributions and that’s all that is needed. Just pool everyone’s investment and pool everyone into a single safe asset allocation.

We don’t use that system because individual 401k’s are extremely profitable for the companies running them. Fees can reduce the long term payout by as much as 1/3.

Yeah the worst part is they don't have to clearly/obviously disclose how much they are taking out in fees. It just vanishes from your account unless you actually look into it. 401k's funds sometimes have fees that are multiples of Vanguard....and perform worse.

Best to go into a self directed account and use Vanguard and safe yourself thousands in fees over a lifetime.

I don't know about mandatory, as 401(k)'s aren't mandatory in the first place. But incentivization using tax code would be sensible.

You're absolutely right about pensions though; people pining for the days of the fixed benefit pension rarely are all that familiar with the pension plans that simply went bust due to inability to fund their liabilities due to market conditions. At least with a 401(k), you're not running out of money because your retirement is being invested too conservatively so as to pay someone older than you, leaving it empty by the time it's your turn.

Agreed.

I cannot imagine relying on a company to pay me during retirement. I get that that system existed once, but the incentives are so misaligned it terrifies me

Corporate or union-run pensions were terrible. The companies or the unions or both would fail to fund them adequately. Or if they did fund them enough, they would mismanage the investment. Sometimes they would outright steal from the pensions.

Another game was simply redefining the terms, almost always reducing the benefits. This was a common game and it's almost irresistible to the managers. At the highest level, the US government is always doing when they tweak the Social Security formulas for retirement age.

At least with the 401k/IRA/SEP etc, you're in control and you see the assets go up or down.

classical "throw the baby with the water" thinking.

A is broken because it cause B and C. replace A with X, which cause C and Z, with Z being as bad as B but a million times harder to fix.

> And then wages stagnated

This was the problem, not lack of defined benefit pensions. With the advent of near zero cost target date retirement funds and equity and bond index funds, there is no need to be beholden to one employer and have to trust the pension plan trustees with your retirement.

Best case scenario is the trustees invest in the same index funds you would, and worst case is they misappropriate the funds or take wild risks. So why not cut out the unnecessary middleman?

If you really want an annuity, then buy it from an actually regulated insurance company, rather than a DB pension plan that is doing who knows what.

The article focuses on a woman aged 66 who is delaying collection of social security to age 70 in order to maximize the monthly payout. So it's not quite as dire as you make out, as long as you stay healthy until 70.

> as long as you stay healthy until 70.

That's a pretty big question mark though.

Many people start developing dementia before 70.

If you can't retire at 66, do you think you will have enough to cover rocketing health care costs and needs as you turn 70 and then 80? At 66 you should be installing accessible bath tubs and stair railings and lifts. If you don't lay the ground work now, it'll get grim sooner rather than later.

She's getting $0 in social security now and will be likely getting over $1500 a month at age 70. Her medical expenses will be mostly covered by Medicaid.

$1500/month is not sunshine and rainbows, but it's not starving in the streets either.

Because what people need in their 70s is "just scraping by"

For many, $1500/mo is living in the streets level of income. I have family that collected early and get like $900/mo. It's grim. Medicare/Medicaid is not free at all. There are lots of things that cost you additional money, that they don't have so they don't get all the medical care they need. Just what they can afford.

Medicare, not Medicaid, although she may be eligible to use Medicaid to supplement.[1]

[1]: https://www.medicare.gov/basics/costs/help/medicaid

What happens if social security is no longer there?

It means you're listening to a false narrative propogated by "US is broke" doom-slingers.

If your left hand owes money to your right hand, your left hand might be broke but you as a whole aren't.

Your hands can move around all the money they want, the question is how much that money will buy. This is the issue countries with declining labor force participate rates are facing. Someone actually has to clean those bedpans and do all the dirty work.

Exactly. It's the capacity of a country to do things that matters, not the number of pieces of paper it has that nominally count that capacity.

Luckily there are still lots of people willing to move to America to clean bedpans.

Social security pays out at 80% when the trust fund is exhausted in a decade. It’s then a policy change to increase benefits back to 100% (no cap in income exposed to SS taxes).

Math might improve a bit with US treasuries paying almost 4%, as that is what the trust fund invests in (specifically special issue treasuries).

> By the end of 2021, the trust funds had accumulated $2.9 trillion worth of Treasury securities, earning an average interest rate of 1.4 percent during that year. The Social Security Administration provides monthly reports on the investment holdings of the trust funds, their maturities, and interest rates. The trustees project that the trust funds will earn $64.6 billion in interest income in 2022.

https://www.cbpp.org/research/social-security/understanding-...

So sustainable that the government is looking to take a 'low' interest loan, bet it, and if that doesn't pan out well they'll just tax us more:

https://www.businessinsider.com/sovereign-wealth-fund-biden-...

It’s sustainable so long as the US economy has productivity and activity to tax. Of course they’d tax everyone more, what else would you expect after all of that wealth in earlier decades was squandered.

If you’re angry about it, be upset about past garbage governance and irresponsibility in not planning for the future by politicians. If you strip mine the economy in the past, you can’t be all surprise pikachu when the bill comes due in the future. Trillions of dollars on useless wars and tax cuts for the wealthy didn’t help.

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