Comment by fennecfoxen | Hacker News Reader

Comment by fennecfoxen | Hacker News Reader

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Hahahahahhaa! So you think your defined-benefit pension is proof against losses, eh?

Well, it can protect you from a lot, that's for sure. But as a rule, pension costs have been rising for decades, and were underfunded even before the economy and tax revenues tanked. In this narrow column I can only highlight a few small pieces of hilarity, like pension plans borrowing cash to invest in real estate to the tune of a $1B loss (Calpers - http://online.wsj.com/news/articles/SB122947172015212225 - use a Google HTTP referer to read the full article). Or the plan where you borrow from your pension plan TO PAY FOR YOUR PENSION PLAN -- http://www.nytimes.com/2012/02/28/nyregion/to-pay-new-york-p...

So yeah, you've got a lot of clout, but you'd better hope that your city, state, or other relevant agency stays afloat or you're at risk of getting dinged a lot like an ordinary hard-working unentitled American.

(At least with a 401(k) or IRA, you know what assets you have and actually own them yourself -- moreover, if you worked somewhere small enough, they might be more diversified than your municipality's future tax revenue.)

The best part is about real estate. Ask my grandma and it's great! Ask people my age and they've lost their entire fortunes, declared bankruptcy and some are still on payment plans for real estate worth 1/2 they paid for it.

Pensions, real estate, and even the stock market is not guaranteed. The best advise is to stay diversified and don't rely on one thing unless you founded it and can keep it relevant.

The best part about the property-vs-other investments is that if you look at it without the bubbles (read: still not NOW) then property values (as a whole) in North America rise almost lock-step with inflation. Even the simplest of index funds FAR outperforms.

The article is written by a Canadian in a Canadian newspaper. The situation in Canada is quite different from the one in the States. Defined benefit pension plans for public civil servants (including teachers) are quite safe in Canada.

translation:

this time it's different

I'm amazed at how prophetic that book [0] is. I wish it would be required reading for every Congresscritter, SCOTUS judge, every member of every federal agency, and all the other cogs in the executive branch ... but I fear they would simply see all the proven mistakes as a blueprint of what to do, only "smarter" this time.

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[0] http://www.amazon.com/This-Time-Different-Centuries-Financia... This Time Is Different: Eight Centuries of Financial Folly It basically takes centuries of data and shows how world leaders tend to make the same mistakes, causing crises, and then follow the wrong solutions to said crises.

More: http://www.reinhartandrogoff.com/

so #1 tip should really be: move to Canada

Too cold.

I was going to say the same thing. Those defined-benefit pension plans sure worked out for the municipal workers in Detroit!

> with a 401(k) or IRA, you [...] actually own them yourself

It seems to me you don't quite own assets in a 401k. You cede some rights to Uncle Sam.

I feel there's enough political risk to socking money away in such accounts to be wary. In the event of a fiscal crisis they're juicy targets.

What rights am I ceding?

Not arguing for the OP, but you're waging that taxes in the future won't be hugely different than they are now.

You essentially have to ask the government for permission to do anything with funds in a 401k/IRA. It's not a normal holding. It's already an impractical pain to make various kinds of investments with such funds; the accounts are pretty much all set up for US traded equities and nothing else. But the real kicker is you don't even have some sort of lifetime guarantee on the restrictions. I could easily see them making it altogether illegal to hold foreign assets, for example. The worst case scenario is some Cyprus style haircut.

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