Teach the children, (and tell the typical retiree to "lump it")

[Unique User]

Within the past 50 years the US has steadily increased it's social welfare spending.
Expanding all programs addressing food, healthcare, housing etc.
But, the poverty levels haven't changed much.

This is in addition to the billions of dollars in philanthropy that are given to US charities each
year that address a portion of the social need in our country.

Actually, that is not true.  Pre-1996 US welfare reform, we averaged around 3-4% of GDP.  After 1996, it went down to around 2% spiking with recessions.  By 2020, we are estimated to be back around 2%. 

Thank you @mm1970 for such a well thought out post.  While it's tempting to think of those that did get out of poverty and extrapolate that to the broader population as some do on this thread, it's just not that easy.  I grew up in a poor neighborhood, went to failing public schools and escaped, mostly through luck and genetics.  Yes I worked hard but I also have a very strong recall memory, a higher IQ and am a white female, without that luck of the draw, it would have been much more difficult. 

[zolotiyeruki]

HE DID IT!

Sounds like a good post to contribute to the Anti-antiumustachian Overheard at Work thread!

[ohio4life]

I've saved my whole life, too bad the young generation will lump us savers in with the rich. Get ready for the dividends and cap gains to be taxed at 50 percent. I can see why tho, too much greed.

This is my concern. Increasing taxes is the right thing to do, but people who saved half their income to retire comfortably will be hurt by what seems like necessary taxation that will result from today's deficit spending.

The pension thing is also a huge concern of mine. I see my account value going up at some fraction of what is being paid in by myself and my employer. The cost of retiree healthcare is in that equation, but it doesn't seem to make any sense that my account doesn't go up, at least, by the amount that is put in. Shouldn't the interest being earned on the account make up the associated costs of healthcare and fund management? So if I pull out early I'll get a fraction of what was put in the account (lump sum option). If I stick it out and use the pension in retirement who knows what I'll actually get. It seems they change the rules every 5 years or so. I think I'll be lucky to do as well as I would have done investing all the money in a 3 fund lazy portfolio.

I tell all the young people that start here to use the member directed pension plan, instead of the defined benefit plan. It seems like a better deal to me and half these people quit in 3 years. You still have to pay the healthcare benefit cost, but you can actually watch your account value go up and down as a true investment. This way the lump sum will better reflect an IRA or 401k and you won't feel like you got cheated by the pension plan itself.

[mm1970]

Within the past 50 years the US has steadily increased it's social welfare spending.
Expanding all programs addressing food, healthcare, housing etc.
But, the poverty levels haven't changed much.

This is in addition to the billions of dollars in philanthropy that are given to US charities each
year that address a portion of the social need in our country.

Actually, that is not true.  Pre-1996 US welfare reform, we averaged around 3-4% of GDP.  After 1996, it went down to around 2% spiking with recessions.  By 2020, we are estimated to be back around 2%. 

Thank you @mm1970 for such a well thought out post.  While it's tempting to think of those that did get out of poverty and extrapolate that to the broader population as some do on this thread, it's just not that easy.  I grew up in a poor neighborhood, went to failing public schools and escaped, mostly through luck and genetics.  Yes I worked hard but I also have a very strong recall memory, a higher IQ and am a white female, without that luck of the draw, it would have been much more difficult.

I think we might be twins (at least the upbringing part, and getting out of poverty).  But I refuse to fall into the survivor bias camp.  Mostly because I surround myself with all kinds of people.

[exterous]

Pensioners have been hosed by expecting big corporations to always be there and send that check.

You don't need the big corporation to be there to send the check as a huge number of private pensions are backstopped by the PBGC which will continue payments up to something like $67,000/year. I think there has only been on major pension benefit loss at a private company - the Delphi salaried workers lost about 40% of their pension benefits during the 2009 automotive bailout (hourly workers received their full pension as part of the agreement between GM and the federal government).

This assumes you work there long enough to qualify

I see lots of folks pining for the DB pension.  Why?  These are a terrible deal for the modern worker.  It limits your mobility and ties your future success to the future success of the company that employs you.

Often its because you get a much better "guaranteed" amount than you could get by investing it. My wife is covered by a pension and I did the math when faced with a 'participate in the pension or get a 403b match' option. Taking the employers 403b match we wouldn't break even with the yearly pension payout unless our investments managed 13% gains every year so we stuck with the pension option. She was eligible after 10 years which isn't a long stretch although I know that duration is not the case everywhere. And, as mentioned above, it doesn't necessarily require the company still exist to get at least a good chunk of your pension.

Of course we hedged out bets and she contributes (sans match) to a 403b anyway. If both SS and her pension exist we are going to go on a spending spree later in life

[MissNancyPryor]

Just wondering - Did it make you feel good too as you helped him?  You must have done a good job helping him filter through the vast amount of BS to help him reach his conclusion.

Yes, definitely.  He was kind of a sad sack about retirement but clearly the job was killing him.  He had already taken a leave for mental health recovery about 10 years ago and was headed that way again.  The anxiety about what to do with his pension and the fear of using a paid advisor was keeping him on the pot.  I felt very awkward about giving any advice so I couched it in terms of "this is what I do and it is a very peaceful approach" and am really happy that he seems so relieved.  I am really surprised he followed thorough and got the book but he does see that it is not a huckster's scam, just solid advice. 

[Dicey]

UPDATE!! 

Following up on the fellow I mentioned in the beginning here, the one wondering once again about whether to cash out his pension or take the monthly payment -  he had also asked me at the time about such-and-such financial advisors who would manage his money for "just 2%" and whether I thought that was a good deal, etc.  He was essentially polling the entire office and was just as lost as he could be about what to do and was very fearful.  He was always walking around sweaty and red-faced with work stress and especially when talking about his next steps.   

As I had done the first time he came around I pointed him to JLCollins, told him about VTSAX, said in my humble opinion he should take the lump and plow everything into these low cost funds and get some peace. 

HE DID IT!

He came back around this week to tell me he got Jim's book and had just done a massive conversion into Vanguard and the index.  He is going to retire this June and take the lump.  He looked physically relieved and is finally ready to let his long career go and try to get healthy with the burden of the stressful job removed.  He was extremely thankful.  He lost both of his very elderly parents in the last 6 months and there will be their estate to settle and he is feeling like he can finally push the retirement button with complete confidence because he is in control and is not getting scammed by some slick financial guru.  He was visibly relieved in both body and spirit.     

What a turnaround.  It feels really good to see him embrace the Simple Path to Wealth.   

Wow! Great news! I hope it all works out for him.