So you are opposed to pensions, and feel that they are so burdensome to business, they should be eliminated today in favor of 401-k, an instrument not really designed for retirement?
According to my spouse, who is an actuary for one of the Top 3 accounting firms and who is one of the top 5 experts worldwide in pension fund management wanted me to point out these facts:
1. Pension funds fail for two main reasons. The first is because the industry is antiquated and not the force in the economy it once was. Obsolete companies tend to do poorly. The 2nd, especially with 'teamster' or 'government' style were merely victims of boom/bust. (wise investing lead to fattened cash reserves, which results in demands by the contributors to increase the benefit, which, by law, they had to do. Conversely, when big companies swallow smaller ones, they also absorb the liabilities of the retirement programs. Its just an accepted cost of doing business in the M&A industry.
2. The reason pensions outperform 401(k) plans, especially in the Nebraska example, is simply due to the difference in risk taken by the manager of the account. Individuals, who have a smaller pool of money to allocate, tend to be more conservative and less savvy about investments than professional money managers. Professional pension fund managers, on the other hand, are more averse to taking risk, which can result, obviously, in better portfolio performance. They also have a bigger pool of money to work with, which is, as I am sure you agree, an advantage in the money markets.
So why do you feel it is more important for individuals to manage their retirement investment than professionals who, by the way, the entire financial services sector experts agree, as well as actuaries worldwide, that given equal management costs, pensions will always outperform individually managed programs.
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Date: 22/3/12 19:57 (UTC)According to my spouse, who is an actuary for one of the Top 3 accounting firms and who is one of the top 5 experts worldwide in pension fund management wanted me to point out these facts:
1. Pension funds fail for two main reasons. The first is because the industry is antiquated and not the force in the economy it once was. Obsolete companies tend to do poorly. The 2nd, especially with 'teamster' or 'government' style were merely victims of boom/bust. (wise investing lead to fattened cash reserves, which results in demands by the contributors to increase the benefit, which, by law, they had to do. Conversely, when big companies swallow smaller ones, they also absorb the liabilities of the retirement programs. Its just an accepted cost of doing business in the M&A industry.
2. The reason pensions outperform 401(k) plans, especially in the Nebraska example, is simply due to the difference in risk taken by the manager of the account. Individuals, who have a smaller pool of money to allocate, tend to be more conservative and less savvy about investments than professional money managers. Professional pension fund managers, on the other hand, are more averse to taking risk, which can result, obviously, in better portfolio performance. They also have a bigger pool of money to work with, which is, as I am sure you agree, an advantage in the money markets.
So why do you feel it is more important for individuals to manage their retirement investment than professionals who, by the way, the entire financial services sector experts agree, as well as actuaries worldwide, that given equal management costs, pensions will always outperform individually managed programs.