pensions « POWIP

24May/102

The “right” to retirement

Too lazy to look up the link, but I recall a recent article about some “right to vacation” being bandied about in Europe [before the whole Grecian meltdown....I think. I wouldn't put it past the “intelligentsia” of Brussels to consider vacation welfare during a massive economic crisis].

To Americans, this was obviously absurd.

But the “right” to retirement is equally absurd, and yet many buy into it. There's a “right” to retirement as much as there's a “right” to a couple weeks on the French Riviera.

I'm not that old, and I'm not a historian, but I find it a wonder that Victor Davis Hanson doesn't just lose it some days, listening to the various whining about how awful it is that 70-year-olds may have to be Walmart greeters.

Look, people. We've got it =great=. We are not dropping like flies in our middle age from strokes and heart disease, as once was more common, and while various infectious diseases are making a comeback, children in the developed world have a 99% chance of making it to adulthood. Historically, there was no such thing as retirement – you worked til you died or fell apart, and in the second case, you better have made sure you had some family to take care of you (though also there were religious groups who would also care for the decrepit, family was the go-to source).

With an advanced economy, people could actually save up some wealth during their productive years, and then enjoy a modest life without necessarily having a large family to support them, though again, once you were decrepit, it helped to have a spinster daughter or a loyal daughter-in-law to take good care of you.

It's not as if the hoi polloi were RVing, going on cruises, living in senior communities in Arizona, taking college classes, etc. back in “Ye Good Olde Days”. The old have it pretty sweet in this society.

Especially since most people still retire when they're not that old – looking up the stats from the Social Security Administration, most people take benefits at their earliest age of eligibility (62), and almost all have started taking it by Medicare age (65). Very few wait til the Normal Retirement Age (now 66, will be 67 for me...but that's where it stops... needs another law for it to adjust even higher). Extremely few wait til the oldest age (70 – you're forced to start taking benefits at that age).

Just using Social Security tables from a few years ago, expected age at death, given you've made it to age 65, is around 85-ish for women and 79-ish for men. So one goes from a situation where you might be alive for a couple years after “retirement” to being around for almost 2 decades.

Now, nothing wrong with retiring early, but those who want to should save up for it.

Just as it was a bad idea to encourage people to buy homes who didn't have the fiscal discipline to save up for even a modest downpayment, it's not a good idea to encourage early retirement amongst those
who don't bother to save up for it. The best encouragement to save is to boost the retirement age well beyond where it is now, set at a place to protect the decrepit (there's always been the Disability portion of Social Security to protect those who really can't work – so if age at earliest eligibility is boosted, we'll see more people taking the disability benefit. But still, it would set an expectation.)

Some recent pension and retirement links:

VIDEO: Author Roger Lowenstein on pension
issues
NYT: Rich pension benefits in Yonkers, NY - a good read, explains the situation for NY pensions
Mark Hemingway: when a public pension is a taxpayer-paid trust fund -remarking on the above NYT story
Ed Mendel: an overview of the options in California for pension reform, current budget

Meep

Meep is a member of the Irish Catholic mafia, having a suspiciously high number of green-eyed, red-haired friends. While she doesn’t have red hair herself [except when she goes into the sun (rare for any vampire)], she does have green eyes. She’s a raving Papist and is a life actuary on the side [i.e., she counts dead people]. An amateur pain-in-the-ass [willing to go pro!], she likes covering retirement, mortality, math, and education issues.

Tagged as: life expectancy, pensions, retirement 2 Comments

23May/104

Followups – demography and pensions

To followup on a previous demography post, we see that Europe is realizing the party is over:

With low growth, low birthrates and longer life expectancies, Europe can no longer afford its comfortable lifestyle, at least not without a period of austerity and significant changes. The countries are trying to reassure investors by cutting salaries, raising legal retirement ages, increasing work hours and reducing health benefits and pensions.
....
In Athens, Aris Iordanidis, 25, an economics graduate working in a bookstore, resents paying high taxes to finance Greece’s bloated state sector and its employees. “They sit there for years drinking coffee and chatting on the telephone and then retire at 50 with nice fat pensions,” he said. “As for us, the way things are going we’ll have to work until we’re 70.”

Yeah, socialism generally isn't that great, but what really isn't great when you don't pump out enough kids to keep the Ponzi transfer-of-wealth from young to old going:

My advice? Death panels. Soylent green. Or encouraging the elderly to take up a more active lifestyle, such as drag racing and meth use.

The numerator of that ratio is pretty baked in, but one can always reduce the denominator. The other choice is, yes, make people work til they're a lot closer to death than 30 years from life expectancy.

Separately, here in the U.S., I see there is some talk of bailing out multiemployer plans, which are situations where a large union of private employees (say, the UAW) has a pension set up for its members, covered by multiple employers (so as to provide some mobility of the workers amongst large employers while holding onto their pension benefit). Thing is, these plans tend to be abysmally funded – many times, worse than the public plans I've been linking:

If these multi-employer lock boxes are underfunded — and they are, obviously — the question, it seems to me, is who is responsible? Who failed to meet its part of the agreement for funding and why?

If it is the companies who agreed in principle to take on the pensions — and they cannot meet that obligation — the unions can either demand the companies be liquidated to meet those obligations (the net result being a loss of jobs but a payment of retirement benefits as promised) or the unions can adjust demands in a compromise that will maintain corporate solvency and so retain jobs.

Is that about right?

What shouldn’t happen is that taxpayers be asked to make up the difference — in a move that serves as de facto welfare both for corporations AND union workers. Or at least, that’s how it appears to me at first blush.

Well, Jeff, yes, there's the PBGC, and sure, we, the taxpayer =may= get to be on the hook for these pensions. But it's not like public pensions in a very big difference: PBGC has a cap on the benefit it will pay out to any pensioner. None of these >$100K pensions for plans taken over by the PBGC.

Thing is, there are too many losses trying to be soaked up right now, and while monetizing debt looks attractive, it would take a hell of a lot to cover everything.

But to give you an idea of how likely the MEP members will get their payments, whether it's the eensy-weensy amount currently guaranteed by the PBGC, or a beefed-up amount to at least single employer coverage, take a look at the pension plans of the union leaders – these are very much well-funded plans. They're not planning on getting bailed out (and they sure as hell don't want to be limited to the modest amounts allowed by a PBGC cap for a bankrupt plan).