Comment by lotsofpulp | Hacker News Reader

Comment by lotsofpulp | Hacker News Reader

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In the US, pension is short for “defined benefit pension”, most often a provided by a single employer stipulating that you work at that employer for a minimum number of years, and the longer you work at one employer, the greater the benefit.

They only exist at taxpayer funded employers or legacy businesses like oil and gas, but most everyone else has switched to defined contribution pensions, but those are referred to as “401k” or “401b” or some other letter for the appropriate section of the law that specifies the tax benefit of saving for retirement.

The latter are better ever since low cost index funds came about, as you get to skip paying the DB pension administrators and remove agency risk.

Virtually all people who have worked and retired at oil and gas companies over the past 40 years had both a company pension AND a 401K. My dad has a paid off house and no bills other than utilities and taxes. He's pulling in over 80K a year in retirement, and he re-invests most of what he's being forced to pull out.

But now people working for profitable businesses can do mega backdoor roth contributions and still invest in the same VOO equities that the pension fund manager would invest in, but cut out all of the agency risk and not be tied to their employer.

Yes, but that's an insanely small minority of people. The average person in my hometown makes $70K a year with overtime and has a $320K house. They're not loading up IRAs. They don't have the money to spare.

The people getting meaningful DB pensions and 401k are also an insanely small minority, hence them getting it in the oil and gas business, which has fat profit margins, like tech companies.

My point is it’s better for the employee who is getting paid a lot (whether it be oil and gas or tech) to receive their compensation in fully liquid cash they can invest in a broad market index fund, rather than have it be held hostage (see agency risk). Plus the employee maintains more leverage to be able to sell their labor to other employers.

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