The Death of the American Pension

[odanny]

33,000 Boeing machinists and other employees on strike are being offered pay raises and these employees are asking that pensions be reinstated, something that Boeing eliminated in 2014. I'm surprised that pensions lasted that long there, they were eliminated by my employer in 1998.

The truth is, they are not going to get them back. The UAW ended them for auto workers in 2007. The 401K retirement plan is what you get today, and over half of Americans contribute to this new retirement model. I believe it is 61% of workers. That needs to be 100%. When employers say that you are better off with a 401K style retirement plan, that is actually true, but these take time, and it is important to start early to maximize gains.




One of the most painful issues dividing labor and management in the strike at Boeing is the loss of the traditional pension plan for union members in 2014.

The dispute has echoes of past labor disputes at Boeing, and at other companies, where workers have lost what used to be a key part of their retirement security. Employers have made, and won, demands to shift the risks associated with their workers’ retirements from their own bottom lines, to the retirees themselves.

Now unions are pushing back, demanding the return of traditional pension plans their members lost in past concession deals. That’s one of the reasons 33,000 members of the International Association of Machinists went on strike Friday after 95% voted against the tentative labor deal that would have increased the money Boeing paid into their 401(k) but would not have restored the traditional pension plan they lost 10 years ago. Restoring pension plans was an initially stated goal of the IAM, but they were not in the deal reached and rejected last week.

Jon Holden, the president of the largest union local at Boeing, said right after the vote to go on strike Thursday night that it wasn’t any one issue, but that “I know that many members haven’t healed from that wound” of losing the pension plans.

But the fact is that the traditional pension plans, once a staple of the retirement of many workers, have become exceedingly rare in the modern American workplace. And once a company drops traditional pensions plans to shift employees to a 401(k) type of retirement account, they are almost always gone for good.

While other unions have also sought to have lost pension plans restored, as the United Auto Workers union did during its successful strike at General Motors, Ford and Stellantis last fall, no American union has ever succeeded in bringing them back. Even though the auto strike produced a deal with record pay raises and other gains for the UAW, it did not restore pension plans to workers hired since 2007.

Employers frequently argue that employees and retirees can be better off with a 401(k) type of retirement plan, especially if their investments do well. During the UAW strike at the three unionized American automakers last fall, Ford CFO John Lawler called the traditional pension plans being sought by the union “a plan of the past.”

Boeing union members are angry they lost their pension plan. They’re not likely to get it back

One of the most painful issues dividing labor and management in the strike at Boeing is the loss of the traditional pension plan for union members in 2014.

finance.yahoo.com

 

[WorldWatcher]

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This is an older piece, but goes into the evolution from traditional pensions to 401K's.

TL ; DR (or watch)

Greed. Companies found they could save money by not having pensions and "money managers" figured they could reach huge amounts of money by getting their hands on retirement funds.

WW

 

[iamwhatiseem]

33,000 Boeing machinists and other employees on strike are being offered pay raises and these employees are asking that pensions be reinstated, something that Boeing eliminated in 2014. I'm surprised that pensions lasted that long there, they were eliminated by my employer in 1998.

The truth is, they are not going to get them back. The UAW ended them for auto workers in 2007. The 401K retirement plan is what you get today, and over half of Americans contribute to this new retirement model. I believe it is 61% of workers. That needs to be 100%. When employers say that you are better off with a 401K style retirement plan, that is actually true, but these take time, and it is important to start early to maximize gains.




One of the most painful issues dividing labor and management in the strike at Boeing is the loss of the traditional pension plan for union members in 2014.

The dispute has echoes of past labor disputes at Boeing, and at other companies, where workers have lost what used to be a key part of their retirement security. Employers have made, and won, demands to shift the risks associated with their workers’ retirements from their own bottom lines, to the retirees themselves.

Now unions are pushing back, demanding the return of traditional pension plans their members lost in past concession deals. That’s one of the reasons 33,000 members of the International Association of Machinists went on strike Friday after 95% voted against the tentative labor deal that would have increased the money Boeing paid into their 401(k) but would not have restored the traditional pension plan they lost 10 years ago. Restoring pension plans was an initially stated goal of the IAM, but they were not in the deal reached and rejected last week.

Jon Holden, the president of the largest union local at Boeing, said right after the vote to go on strike Thursday night that it wasn’t any one issue, but that “I know that many members haven’t healed from that wound” of losing the pension plans.

But the fact is that the traditional pension plans, once a staple of the retirement of many workers, have become exceedingly rare in the modern American workplace. And once a company drops traditional pensions plans to shift employees to a 401(k) type of retirement account, they are almost always gone for good.

While other unions have also sought to have lost pension plans restored, as the United Auto Workers union did during its successful strike at General Motors, Ford and Stellantis last fall, no American union has ever succeeded in bringing them back. Even though the auto strike produced a deal with record pay raises and other gains for the UAW, it did not restore pension plans to workers hired since 2007.

Employers frequently argue that employees and retirees can be better off with a 401(k) type of retirement plan, especially if their investments do well. During the UAW strike at the three unionized American automakers last fall, Ford CFO John Lawler called the traditional pension plans being sought by the union “a plan of the past.”

Boeing union members are angry they lost their pension plan. They’re not likely to get it back

One of the most painful issues dividing labor and management in the strike at Boeing is the loss of the traditional pension plan for union members in 2014.

finance.yahoo.com

It is simply not true they are "better off with 401ks" - because people borrow against them, cash them out and stop contributing to them.
The vast-vast-vast majority of everyday people are nowhere NEAR responsible enough to manage their retirement funds.
I have said it 100 times for the past 15 years or so... by the year 2040 - it will become normal again for old people to HAVE to live with their children, because they will be broke.

 

[Toddsterpatriot]

I have said it 100 times for the past 15 years or so... by the year 2040 - it will become normal again for old people to HAVE to live with their children, because they will be broke.

With Bidenflation and the flood of illegal aliens, thanks to the Border czar, the kids will be happy to move into their parents' home, it will be the only way they'll ever own one.

 

[Votto]

It is simply not true they are "better off with 401ks" - because people borrow against them, cash them out and stop contributing to them.
The vast-vast-vast majority of everyday people are nowhere NEAR responsible enough to manage their retirement funds.
I have said it 100 times for the past 15 years or so... by the year 2040 - it will become normal again for old people to HAVE to live with their children, because they will be broke.

As democrats continue to destroy the economy with next to no resistance from the GOP, people will simply have to learn to become more tribal and have their parents live with them, along with their adult children in order to survive economically.

 

[iamwhatiseem]

As democrats continue to destroy the economy with next to no resistance from the GOP, people will simply have to learn to become more tribal and have their parents live with them, along with their adult children in order to survive economically.

And meanwhile, according to plans long ago set in place by BOTH PARTIES - wealth disparity will resemble more how it was in the late 19th century.
The middle class will be wiped out, or it may still exist, but it won't be your "1980s middle class"
We are quickly going back to people renting homes instead of owning, people staying with their parents till their 30s, and then live with their children a few decades later - all because they can't afford to do otherwise.
Meanwhile - we will have a dozen $Trillionaires.

 

[odanny]

It is simply not true they are "better off with 401ks" - because people borrow against them, cash them out and stop contributing to them

It is after you've retired and have been contributing for at least 20 years. The only exception are government employees and police and firefighters, who all still get Cadillac pensions, paid for by American taxpayers.

You will have more income on a 401K that has had at least 20 years to mature than you would on a private employer pension, with only a tiny few exceptions (maybe John Deere or UPS, for example)

 

[iamwhatiseem]

It is after you've retired and have been contributing for at least 20 years. The only exception are government employees and police and firefighters, who all still get Cadillac pensions, paid for by American taxpayers.

You will have more income on a 401K that has had at least 20 years to mature than you would on a private employer pension, with only a tiny few exceptions (maybe John Deere or UPS, for example)

All true, but only if people don't borrow from it, reduce and or stop contributing to it.
Which MOST people do.
Relying on stupid people to do smart things is not a good plan. It is a stupid plan.

 

[martybegan]

It is after you've retired and have been contributing for at least 20 years. The only exception are government employees and police and firefighters, who all still get Cadillac pensions, paid for by American taxpayers.

You will have more income on a 401K that has had at least 20 years to mature than you would on a private employer pension, with only a tiny few exceptions (maybe John Deere or UPS, for example)

And with defined contribution plans you get your matches at worst every year, and your own contributions are entered at worst monthly.

That becomes YOUR money, not the pension plan's money.

 

[martybegan]

All true, but only if people don't borrow from it, reduce and or stop contributing to it.
Which MOST people do.
Relying on stupid people to do smart things is not a good plan. It is a stupid plan.

I borrowed from it 3 times in 25 years, no more than 10% each time, and it barely impacted my projected value at age 65.

 

[Woodznutz]

It is simply not true they are "better off with 401ks" - because people borrow against them, cash them out and stop contributing to them.
The vast-vast-vast majority of everyday people are nowhere NEAR responsible enough to manage their retirement funds.
I have said it 100 times for the past 15 years or so... by the year 2040 - it will become normal again for old people to HAVE to live with their children, because they will be broke.

Worse yet, many retirees' homes are still heavily mortgaged, the equity having been borrowed often several times. The biggest culprit is paying for children's college.

 

[Woodznutz]

My company has no pension plan, so I bought an apartment building to fund my retirement. Worked out great. However, I'm still working and piling it up, probably for my kids.

 

[odanny]

All true, but only if people don't borrow from it, reduce and or stop contributing to it.
Which MOST people do.

My employer had restrictions on borrowing. It had to be for only a select few reasons, such as buying a home or paying medical bills. Trust me, I would have borrowed from mine if I could have, I was only able to borrow from it after Covid, when these were suspended for a year. I was extremely fortunate my portfolio had rebounded before I withdrew, many of my coworkers took money out when their balances were way down.

Agreed that people do stupid things with their money, a friend of mine works at Walmart and can take money out of their 401K whenever they want, no restrictions.

 

[iamwhatiseem]

I borrowed from it 3 times in 25 years, no more than 10% each time, and it barely impacted my projected value at age 65.

Because you paid it back.
Currently just under a 1/3 of all 401ks have a loan that is in default.
Add to that, 41% of employees do not make ANY contribution to their plan.
Yours worked because you are not stupid.
I borrowed against mine way back in the 1990s twice.
But I paid it back and kept contributing and contributing. Because I understand the value of free money. I am not stupid either.
But MOST people are drop dead stupid when it comes to economics

 

[iamwhatiseem]

My employer had restrictions on borrowing. It had to be for only a select few reasons, such as buying a home or paying medical bills. Trust me, I would have borrowed from mine if I could have, I was only able to borrow from it after Covid, when these were suspended for a year. I was extremely fortunate my portfolio had rebounded before I withdrew, many of my coworkers took money out when their balances were way down.

Agreed that people do stupid things with their money, a friend of mine works at Walmart and can take money out of their 401K whenever they want, no restrictions.

Consider the catastrophic stupidity for people buying new cars, especially new trucks with $800/mo. payments which is close to 25% of their take home pay.
Yet - look at how many people do that

 

[odanny]

I borrowed from it 3 times in 25 years, no more than 10% each time, and it barely impacted my projected value at age 65.

That is exactly how the system should work. Making a withdrawal is like using a credit card in reverse. Interest on a CC makes you pay 10-20% more if allowed to accrue, where withdrawals can take your balance down more than that over time from lost interest.

 

[martybegan]

Because you paid it back.
Currently just under a 1/3 of all 401ks have a loan that is in default.
Add to that, 41% of employees do not make ANY contribution to their plan.
Yours worked because you are not stupid.
I borrowed against mine way back in the 1990s twice.
But I paid it back and kept contributing and contributing. Because I understand the value of free money. I am not stupid either.
But MOST people are drop dead stupid when it comes to economics

Maybe that's what we need more of in this country, more people having to do more things to secure their own futures.

I started contributing when I first started full time in 1999, never less than 10%, and always enough to get the match.

I can thank my Grandfather for that advice, and I've always stuck to it.

 

[martybegan]

That is exactly how the system should work. Making a withdrawal is like using a credit card in reverse. Interest on a CC makes you pay 10-20% more if allowed to accrue, where withdrawals can take your balance down more than that over time from lost interest.

If there is an option to borrow, only idiots would withdraw. Hell, they deducted the repayments from my pay automatically.

The only real loss is from the taxes removed from the repayment, and of course the lost interest, but then again if you time it right for a market drop, you buy back the shares in each fund for cheaper than they might have been.

 

[WorldWatcher]

It is after you've retired and have been contributing for at least 20 years. The only exception are government employees and police and firefighters, who all still get Cadillac pensions, paid for by American taxpayers.

You will have more income on a 401K that has had at least 20 years to mature than you would on a private employer pension, with only a tiny few exceptions (maybe John Deere or UPS, for example)

This of course requires two things:

#1 401K's are voluntary. I work in HR for an organization of 3,663 people. The number of people participating in a 401K is actually pretty low as percentage of total employees. That percentage shifts radically depending on the level of EE. Low level EEs have very few 401K and participation increases as salaries increase.

#2 It also assumes significant saving in a 401K as a percentage of income. You put $20 bucks a month in a 401K and you are not going to have an equivalent income from a traditional pension.

WW

 

[odanny]

If there is an option to borrow, only idiots would withdraw. Hell, they deducted the repayments from my pay automatically.

Mine as well. I forgot I borrowed from mine for a home addition, and I remember making the payment on the loan and contributing at the same time. I remember squeezing pennies to do so, but I held out for 2 years before pausing my contributions. I never contributed every year of my employment to my 410K, maybe about 60-70% of time. Maybe even less.

Caused me zero problems where I am at today.

Boeing has offered to raise their contributions to employees 401K to $10,800 annually! My employer max was $1,500 annually.