Does he really believe people are better off with 401ks and IRAs than traditional pensions? Does his math only make sense if the market is returning 12% a year? It seems like he’s against anything that traditionally helped the working man (pensions, social security, health insurance).
It's pretty easy for companies to drop pensions and leave retired folks cashless. It does happen. I recall several instances of companies going bankrupt and doing this. Thankfully those impacted can get jobs as greeters at bog box stores.
Don't know Dave Ramsey wrote:
It's pretty easy for companies to drop pensions and leave retired folks cashless. It does happen. I recall several instances of companies going bankrupt and doing this. Thankfully those impacted can get jobs as greeters at bog box stores.
That would be a worry, except these pensions are insured. Sure there are limits, but they’re pretty high, particularly as you get older.
Were the pensions of the Detroit auto workers insured?
coach wrote:
Were the pensions of the Detroit auto workers insured?
Yes, but it appears the insurance was unused and GM and Chrysler have both continued to pay pension benefits. Other retirement benefits we’re likely lost (dental, vision, etc. though that is unrelated to the discussion at hand).
https://www.epi.org/blog/by-saving-billions-in-retiree-health-and-pension-benefits-auto-bailouts-were-an-even-bigger-success-than-acknowledged/Dave Ramsey says that alot wrote:
Don't know Dave Ramsey wrote:
It's pretty easy for companies to drop pensions and leave retired folks cashless. It does happen. I recall several instances of companies going bankrupt and doing this. Thankfully those impacted can get jobs as greeters at bog box stores.
That would be a worry, except these pensions are insured. Sure there are limits, but they’re pretty high, particularly as you get older.
The only reason I stay at my company is because of the pension. I started in 2003 and the pension was no longer offered 2 years later for new hires. 10 more years to go...
It has little to do with the safety of pensions, which are mostly insured by the government. In the old style defined benefit pension he’s talking about, you get a fixed amount per month for life. Obviously as time goes on in your retirement, that fixed amount buys less with inflation as prices increase with virtually everything over time.
With a defined contribution pension such as a 401k, you have more flexibility in how much you take out each year once you retire, and you can also profit more if your funds outperform the market, of course it can go the other way as well.
I didn't know Dave is opposed to pensions or why but I can provide some thoughts to consider. For years I projected my pension and knew I would be fine in retirement. But I never counted on the projections because I wanted to retire early. Retiring early meant two things. One was a reduction in monthly benefit (because I would be collecting for more years). The second thing was another reduction in the projections because I wouldn't have worked as long.
Since most pensions do not have a COLA, if they are your primary retirement dollars, you do lose buying power over time.
The reality of my projections fell way short of what they were 10 years into my career. At about 13 years into my career the formula changed to life time earnings instead of last 5 year average earnings. Thirteen years later the pension was frozen. So instead of collecting over $50K per year, I now will start collecting about $20K next year.
Fortunately I always wanted to retire early and I saved money in 401K, IRA and other non-retirement investments. I retired early and am living off savings/investments that will be available to my children some day. If I assumed my pension would have matched my initial projections and never saved, I would be working for many more years.
The conclusion is accept the pension but don't count on anything that you have not already earned and could collect if you quit today. Remember if you job hop a lot, you may never be vested. If you save it yourself, you will always have what you saved.
I don't think he's opposed to pensions, he's opposed to basing your entire retirement on having access to a pension.
Not sure if this fits into Ramsey's dislike of pensions but consider the following scenario. Pension eligible with 20 years of service - You put in 19 years, and boom, company sh1t cans you for no reason, there goes the pension.
401k (or similar investment vehicle) on the other hand, belongs to you.
About to retire wrote:
Does he really believe people are better off with 401ks and IRAs than traditional pensions? Does his math only make sense if the market is returning 12% a year? It seems like he’s against anything that traditionally helped the working man (pensions, social security, health insurance).
Ramsey cannot touch a pension. Ramsey can have a person transfer IRA to his firm so Ramsey can manage the assets. Ramsey can ask a person to roll over 401-k to a rollover IRA so Ramsey can manage the money. Ramsey is not teaching finance or accounting (he either majored in accounting or finance in college). A college professor may not have skin in the game. Ramsey wants to manage your money and he cannot touch a pension. Ramsey's advice is not neutral. He has an agenda. End of thread.
Angry Willy wrote:
Not sure if this fits into Ramsey's dislike of pensions but consider the following scenario. Pension eligible with 20 years of service - You put in 19 years, and boom, company sh1t cans you for no reason, there goes the pension.
401k (or similar investment vehicle) on the other hand, belongs to you.
We can debate about whether you’re better off contributing to a 401k for 20 years or having a pension; however, most of the time when it comes up on his show, it’s someone retiring and wanting to know if they should take the lump sum or a monthly payout. He has never once recommended a monthly payout. He advises to roll it into an IRA and invest it in good growth stock mutual funds. This is ridiculous. When you’re 67 and depending on the money to live on (and no longer contributing), you can not expect a 12% return in the market. If you don’t need the money and want to pass it onto your kids, that’s fine (though a traditional IRA is a terrible way to inherit money); for everyone else, the lifetime income stream is a better deal.
Why worry about Ramsey? wrote:
Ramsey cannot touch a pension. Ramsey can have a person transfer IRA to his firm so Ramsey can manage the assets. Ramsey can ask a person to roll over 401-k to a rollover IRA so Ramsey can manage the money. Ramsey is not teaching finance or accounting (he either majored in accounting or finance in college). A college professor may not have skin in the game. Ramsey wants to manage your money and he cannot touch a pension. Ramsey's advice is not neutral. He has an agenda. End of thread.
^This. A similar debate is currently going on in the Dow thread, where alleged financial advisor ‘Ghost of Igloi’ has referred to government pensioners as “lazy slobs”. He’s now trying to walk it back, but is clumsily stumbling over himself as he tries to blame other posters for his own words. Very entertaining.
I am sure glad and thankful to be offered a pension. Vested at 20 years of service (50% of final year salary draw) and maxed out at 32 (74% draw). With COLA. Death benefits that continues onto spouse. I can be maxed out and drawing at 55. The fund is currently over 100% funded. Oh, and my employer pays all of the employees portion and theirs. Plus we have access to a 457b. Feeling good about my “crappy” pension.
About to retire wrote:
Does he really believe people are better off with 401ks and IRAs than traditional pensions? Does his math only make sense if the market is returning 12% a year? It seems like he’s against anything that traditionally helped the working man (pensions, social security, health insurance).
Anyone against pensions is anti-American. Veterans & federal pensions are a major financial part of soldiers lives who sacrificed 20+ years to this country.
Firefighters, teachers, police pull State pensions and do not pull social security and contribute much more than other Americans do to SS. The truth is pensions are a part of what made this country great.
The truth is the Koch brothers have been trying to bust unions not due to philosophical differences but because they want access to the billion dollar portfolios.
It’s all about the money man.
Why worry about Ramsey? wrote:
About to retire wrote:
Does he really believe people are better off with 401ks and IRAs than traditional pensions? Does his math only make sense if the market is returning 12% a year? It seems like he’s against anything that traditionally helped the working man (pensions, social security, health insurance).
Ramsey cannot touch a pension. Ramsey can have a person transfer IRA to his firm so Ramsey can manage the assets. Ramsey can ask a person to roll over 401-k to a rollover IRA so Ramsey can manage the money. Ramsey is not teaching finance or accounting (he either majored in accounting or finance in college). A college professor may not have skin in the game. Ramsey wants to manage your money and he cannot touch a pension. Ramsey's advice is not neutral. He has an agenda. End of thread.
Except Dave isn’t making any money as a financial manager. I’m sure he makes money on referrals (I’ve heard it’s $80 a lead) on financial advisors, which could be substantial given the size of his audience, but I would guess the majority of his income is from book sales (which he’s able to sell to his captive radio audience).
He has philosophical capitalistic/libertarian ideal, which by definition are pretty anti-labor/anti-working class. Anything the government or your employer provides to you is evil. The fact that virtually every private employer has either gotten away or is trying to get away from offering pensions should tell you something.
Pensions worked back when dudes dropped off at 71 or 72. Now they live til 78 to 80 and the actuarial don't work. Even worse are guvment pensions when people can retire at 55 with full pension then live another 40 years.
Anti-American wrote:
Firefighters, teachers, police pull State pensions and do not pull social security and contribute much more than other Americans do to SS.
If you pay into social security you can pull. I am one of the professions listed and will be drawing what I qualify for on both when eligible.
Pensioner wrote:
Anti-American wrote:
Firefighters, teachers, police pull State pensions and do not pull social security and contribute much more than other Americans do to SS.
If you pay into social security you can pull. I am one of the professions listed and will be drawing what I qualify for on both when eligible.
Correct. Government pensioners can receive SS if they have enough quarters, but the amount will be drastically reduced thanks to WEP and/or GPO.
Gruntz wrote:
Correct. Government pensioners can receive SS if they have enough quarters, but the amount will be drastically reduced thanks to WEP and/or GPO.
Can you briefly explain WEP and GPO? I have not heard of those. Thanks in advance.
At My last government job, different employer but same pension plan, we did not pay into SS. My current job we do. Honestly wish I could opt out and invest the ~8-9% into my 457b.