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Comment by nightski | Hacker News Reader

Who do you think the shareholders are? That's right, it includes 401(k) and retirement plan owners. It's a way to diversify your retirement beyond a single company. A pension plan in a company that can disappear and that can make investments on your behalf without any control is the big con.

The fact that people contribute less to their 401(k) means they care less about saving for retirement, not that the plans themselves are a con. I personally don't even have a 401(k) because I am self employed and there are other options.

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https://www.cnbc.com/2021/10/18/the-wealthiest-10percent-of-... ("The wealthiest 10% of Americans own a record 89% of all U.S. stocks")

https://www.usnews.com/news/national-news/articles/2021-03-1... ("Median household owns $15k in equities")

(unless you're wealthy, you are a token participant in the capital markets)

I'm fine being a token participant as long as it means I've been seeing significant gains over the past decade, which I have.

I'm not faulting the selfish position, simply pointing out the game is rigged for everyone except outliers (like yourself or the ultra wealthy). These are just facts, not feelings, when you review the data about who has sufficient cashflow for inflows into investments during accumulation phases as well as their current and potential future investment exposure to these asset classes.

Congrats on the luck (no snark, honestly). But let us not extrapolate luck and personal anecdotes to solutions for systems. "In God We Trust, all others must bring data", working backwards from first principles, etc.

They aren't facts. The number of millionaires in the U.S. has exploded. Many are benefiting from the markets. It's not luck.

The fact that many would rather spend than save does not change that these opportunities are for everyone. The best selling car in America is the F-150 which is quite expensive...

> They aren't facts. The number of millionaires in the U.S. has exploded. Many are benefiting from the markets. It's not luck.

Are you sure it's not luck?

https://blogs.scientificamerican.com/beautiful-minds/the-rol... ("The Role of Luck in Life Success Is Far Greater Than We Realized")

https://www.technologyreview.com/2018/03/01/144958/if-youre-... | Ref: https://arxiv.org/abs/1802.07068 ("Talent vs. Luck: The Role of Randomness in Success and Failure")

https://www.pbs.org/newshour/economy/making-sense/analysis-i... ("Analysis: If you’re rich, you’re more lucky than smart. And there’s math to prove it")

https://www.marketwatch.com/story/when-you-realize-how-much-... ("When you realize how much luck goes into investing, you might change your methods")

Millionaire is a fairly trivial threshold these days. Social security is now paying some people 54k/year inflation adjusted which would take well over 1 million to safely generate.

A couple living on social security + 2 million in assets may be financially secure but they are still middle class.

> The best selling car in America is the F-150

To be fair, F-150 and other pickup truck sales figures are buoyed by fleet purchases. The better figure to cite may be that the average new car transaction is now north of $48k; ten years ago, it was around $30k, and this rise has beaten general inflation.

Do you have any stats that show that pickup truck sales are bolstered more by fleet purchases than other categories such as sedans and economy cars, both of which are also purchased widely for various fleets?

I did a bit of research, and this is what I found:

This article says about 20% of vehicles sales are to fleets. It says vans are the most popular fleet vehicles. It syas "light trucks" (which includes vans) outpace cars in fleet registrations at 22.5% vs 17.3%. https://www.autoserviceworld.com/fleet-registrations-continu...

Based on that data, I see strong evidence that the F150 is not boosted over other types of vehicles. I certainly found nothing to support the idea that it is, and if it is, it does not seem to be a strongly dominant consideration.

Do you think all prima facie economic problems can be resolved down to problems generally of individual responsibility/spending choices like this? Or just this one? Does the prosperity of some always assert the culpability of the rest with regards to their own poverty? Is the measure of person always relative like this?

What does it mean to you to live in world with other people in general? Are we all fundamentally competitors like this? Winners and losers in a game of skill (and definitely not of chance)? Does the existence of losers reinforce the necessity or merit of the game, of the structure in question? Or are we trying to make everyone winners, trying to teach them to get it together enough to not buy all their flashy cars and such?

No I don't, but I do think in an ideal world it would. Not everyone wants to build wealth nor should they be compelled to. A society that gives people the options to do what they want (in the sense of building wealth vs spending it) would be ideal in my opinion.

> But let us not extrapolate luck and personal anecdotes to solutions for systems

We can certainly extrapolate if we look at the last 13-14 years.

The fact that the wealthiest 10% own 90% of stocks does not mean the game is rigged. (I mean, that's sort of like saying the game is rigged because the rich people have all the money.) Anyone can purchase stocks and the SEC works hard to make sure that all market actors have access to the same information. Stocks are one of the least rigged games! Long success in stocks does require some knowledge about picking a company and some discipline, but so do lots of things.

Unless maybe "the game" is meaning a broader economic "game", which is (apparently) rigged because some people are (way) richer than others? You'd expect something like 80/20 just from a Pareto distribution, which if I understood the paper correctly, generally occurs whenever people have free choice. I guess one could required "not rigged" to provide equal outcomes, but since people have unequal ability, equal outcomes seems "rigged" to me, just in the other direction, of pulling down the highly skilled.

> > ("The wealthiest 10% of Americans own a record 89% of all U.S. stocks")

This is tautologous. "Wealthy" means mostly "built, and still owns a decent chunk of, a company whose shares are highly valued".

Also, I could, like my parents, own nothing in the stock market, but have a paid off house and decent savings and a state pension, and be doing well. Proportion of capital markets ownership is too skewed a metric to reason about.

> This is tautologous.

No, it's not, and it's a problem that you're thinking this way. A tautology would be "Americans in the top 10% of wealth are wealthier than the bottom 90%." A tautology is necessarily true according to logic.

Logic does not dictate that the top 10% own 90% of the equities. And, in fact, there's a strong argument that societies with extreme inequality in wealth distribution are structurally unsound societies (I don't mean that they're economically unsound, though I'd argue that, too).

I'm saying "owning most of the stocks" is completely equivalent to "wealthiest". The exact percentage isn't important. It's not as though those wealthy people need to have lots of actual cash to be considered wealthy in such stats; they just need to own enough of a company that's providing lots of value, or due to, that drives up the wealth stat.

> there's a strong argument that societies with extreme inequality in wealth distribution are structurally unsound societies (I don't mean that they're economically unsound, though I'd argue that, too).

This just depends on how you define "structurally unsound" and "economically unsound".

> "owning most of the stocks" is completely equivalent to "wealthiest"

That's still not a tautology just because in practice it is usually true, and is easily disproven as such: Stock values could all nosedive to nothing, and the wealthiest people would still mostly all be the wealthiest due to non-stock assets.

> is easily disproven as such

Not that easy. If the wealthy own 90% of the stocks and 90% of their wealth is in stocks, and the stocks disappeared, they may still be wealthy due to the remainder, but still the bulk of the their wealth was in stocks.

> The exact percentage isn't important.

The exact percentage is exactly critical informarion.

Imagine, for the sake of argument, that the 10% own 100% of all net worth. Imagine net worth of 90% of the population is exactly at zero. Do you think democracy would still function, liberty would survive?

The folks at zero would be closer to slaves than to anything we recognise today.

They will still have wealth because that wealth is their ability to work and produce value.

I see you are to misuse words to mean something other thant what they actually mean.

A considerable part of the wealth of slaveowners was the value of their slaves. Slaves were traded for a lot of money. That means, economically speaking, if you own yourself you have that wealth.

This is not a tautology but a (not-so-good) measurement of inequality.

Pension plans hold equity and other assets from many companies. They are essentially like mutual funds with a defined annuity payout.

Defined benefit plans should never have died out, they should have been part of a total mix. There is no reason you can’t have pensions along side social security along side 401k/IRA plans. This gives retirees multiple avenues for payout each with their own risk profile. The 401k is a great idea as a retirement supplement for folks who are interested in saving more and managing investments. But many (most?) people are not sophisticated enough to (a) take advantage of tax deferred savings vs paying rent and buying food, (b) muck with investment options roll overs and all the like.

We are about to see a mass humanitarian catastrophe over the next 20 years as the 401k dependent generations retire, social security buckles, and we learn why pensions existed to begin with all over again.

There is no difference between a defined benefit pension plan and a target date retirement fund, except you avoid the extra agency risk that comes with giving control of your savings to the board of the pension plan and its vendors.

The only defined benefit pension plan that has a leg up on index funds is a taxpayer funded one, because it has the power to tax, assuming the taxing jurisdiction will remain sufficiently economically productive decades into the future (see Detroit for an example of one that did not and hence was able to cut benefits to DB pension recipients).

Personally, I would only value a DB pension paid by the federal government, since it can always print money. Otherwise, give me my 0.03% expense ratio index funds.

Investment target date plans are optional and still include the challenges of people executing roll overs, taking loans, cashing out with penalties, and actually choosing the right investment target date plan. Pensions are not optional, you can’t cash them out, you can’t take a loan, and they don’t require any logistics to maintain after you’ve moved on. The biggest flaw of 401ks is their optionality which allows present self to buy a new car making retired self homeless.

You (and I) aren’t the issue here - it’s the majority of people who are unsophisticated. They are autopiloting through life, assuming social security is a retirement plan or that they’ll save later when they’re closer to retirement. This is an awful lot of people. The truth is as a society we will be carrying them in their old age because we didn’t pay up front, instead we set up an optional plan assuming they would pay up front. Instead we will collectively be figuring out a way to deal with the massive underprepared aged population using present dollars rather than compounded dollars.

I think you're conflating "mandatory participation" with "defined benefits". You seem to want a system that prevents future-damaging choices by participants.

I think the other argument going on above is that "defined benefits" isn't actually possible without some escape mechanism (like tax collection) to provide the benefits when it turns out the fund didn't perform as well as hoped. When a private pension fund gets in trouble, its participants lose their safety. The others want a system that prevents future-damaging choices by fund operators, and see defined contributions as the only viable way to do this. You own a chunk of the fund and can transfer it to different stewards.

https://www.pbgc.gov/wr/find-an-insured-pension-plan/pbgc-pr...

PBGC relies on being bailed out all the time. Most recently, multi employer plans got another federal taxpayer bailout:

https://www.nytimes.com/2021/03/07/business/dealbook/bailout...

If they didn’t, PBGC would have easily failed. The whole thing is an excercise in who has sufficient political power to get bailed out, and if I am playing that game, why not just directly put my hand in the SP500 and ensure I am bailed out directly rather than maybe via proxy.

Some escape mechanism like insurance.

This is just scare talk, nobody says that a checking account is impossible without "some escape mechanism" meaning FDIC.

No, the benefit of DB plans over target date retirement funds is obvious and undeniable. A DB fund offers participants a guaranteed benefit with the additional risk of taking a haircut in bankruptcy. A target date index fund offers no such guarantee whatsoever. Further, a pension can provide equivalent benefits of individual retirement accounts much cheaper. Who will pay fewer basis points for the target date fund, you or a billion dollar pension?

What happens to the proportion of workers who buy the target date fund (even narrowing ourselves to the ones who contribute appropriately and so on) who effectively outlive their money? Kicked to the curb?

> There is no reason you can’t have pensions along side social security along side 401k/IRA plans. This gives retirees multiple avenues for payout each with their own risk profile.

I work for my state's government and we have exactly that.

Defined benefit pension plans are terrible and ought to be completely eliminated. They are far too risky for employees, employers, and taxpayers. There is a moral hazard where employers promise pension benefits based on overly optimistic estimates of investment returns. Then when those returns fail to materialize decades later the increased pension contribution requirements can drive the company into bankruptcy and taxpayers are left to pick up the tab.

Replace all pensions with defined contribution plans. Individual employees might make poor decisions and end up short of retirement funds but at least there are no systemic risks.

Pensions tend to be much more generous.

They are also riskier.

People see the generosity of pension plans and (understandably) want that, without having the risk.

Totally agree about diversification. Reliance on a company pension fund is terrifying.

That said, the old pension model forced workers to make large contributions. The 401k model does not. (Unless your company has some amazing match deal… I’ve only ever seen shitty deals like 25% of up to 4% of salary, whereas more like a 30% savings rate is what’s really needed.)

For comparison's sake. I have a pretty good pension plan and my employer contributes about 27% of my gross salary to it along with the 8% I contribute. If someone offered a 401k match of 300% on my 8% I'd call that a good deal, but what you described is what people more often get.

Careful here. Some of that 27% is no doubt to achieve full funding, so shouldn't really be thought of as the "cost" to provide the pension per se, rather, the cost to catch up on previous underfunding.

Plain and simple: It's a way to tear up ERISA oversight and pension guarantees and instead get fed to the wolves of wall street. Who doesn't know someone who's 401k was wiped out just months before they were about to retire in 2001 or 2008? Why make rules where you can't change your portfolio settings more that twice a year and in very productive and limited ways in exchange for inescapable Management fees?

Someone on the brink of retirement would not be 100% stocks, ideally more like 60% at most. Both of those cases were about a 50% drop peak to trough, so the loss was around 30% on paper. In the '08 case, the market recovered in about 4-5 years. Holding firm and sticking to a 60/40 allocation would've meant very little realized losses prior to it bouncing back.

For the '01 case, it's hard to find much sympathy for a stock heavy portfolio that took a 50% haircut, considering that grew 400% in the 10 years that preceded it.

I don't know anyone whose 401(k) plan was wiped out just before retirement. Some of them experienced small losses. Management fees are generally very low unless you pick the worst mutual fund options.

> means they care less about saving for retirement

They shouldn't be "caring" so much about the high cost of living I guess?

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