How People Planned Retirement Without Financial Advisors - Pensions, Social Security, and Simplicity скачать в хорошем качестве

How People Planned Retirement Without Financial Advisors - Pensions, Social Security, and Simplicity

1965. John retires at 65 after 35 years at General Motors. His retirement plan: pension pays 60% of final salary ($600/month) for life. Social Security adds $150/month. Total: $750/month, guaranteed until death. Wife gets survivor benefits. No stock market risk. No investment decisions. No financial advisor needed. 2025. Sarah retires at 67 after 40 years in various jobs. Her retirement plan: 401(k) with $400,000 saved (if she's lucky). Must manage withdrawals to avoid running out of money. Market crash could destroy her savings. Social Security pays $1,800/month but might be cut. She's hired three financial advisors and still worries constantly. What changed? How did retirement go from simple and guaranteed to complex and terrifying? HOW RETIREMENT WORKED IN THE PENSION ERA (1950s-1980s): THE PENSION SYSTEM: Large employers—manufacturers, utilities, railroads, government, unions—provided defined benefit pensions. You worked 20-30 years, then received a monthly check for life based on your salary and years of service. Common formula: 1.5% × years worked × final salary. Example: Work 30 years, retire earning $20,000/year. Pension = 1.5% × 30 × $20,000 = $9,000/year ($750/month). For life. Adjusted for inflation at many companies. Survivor benefits for widows. No investment decisions required. SOCIAL SECURITY: Established 1935, expanded through 1970s. Workers paid in via payroll taxes. At 65 (later 67), you received monthly checks based on your earnings history. Not meant to be sole income, but combined with pension, it worked. In 1970, average Social Security: $118/month ($1,416/year). Average pension from major employer: $200-400/month. Combined: $300-500/month income ($3,600-6,000/year) when average annual expenses were $5,000-7,000. Houses paid off. Medical care cheaper. It worked. PERSONAL SAVINGS (MINIMAL): Some people saved in regular bank accounts earning 3-5% interest. Some bought savings bonds. Few invested in stocks—that was for rich people. Most savings were modest ($5,000-15,000) used for emergencies, not retirement income. The pension and Social Security were the plan. NO COMPLEXITY: No financial advisors needed. No investment portfolio to manage. No withdrawal rate calculations. No worrying about sequence-of-returns risk or market crashes destroying your retirement. You worked, you retired, you got checks until you died. Simple. WHY THIS SYSTEM WORKED: Employers paid: Companies funded pensions as labor cost, like wages. Workers earned the pension through years of service. It was deferred compensation, not charity. Pooled risk: Pension funds pooled money from all workers. Some died young (their contributions supported those who lived long). Some lived to 95 (supported by those who died at 70). Actuarial science made it predictable. Professional management: Pension funds hired investment managers. Workers didn't manage anything. Experts handled it. Legal protections: ERISA (1974) regulated pensions, requiring funding standards and insurance (PBGC) if companies went bankrupt. Strong labor: Unions negotiated pensions as core benefit. 35% of workers unionized in 1950s. Union contracts set standards non-union employers had to match to attract workers. WHAT KILLED THE PENSION SYSTEM: 1978: The 401(k) Accident Congress added section 401(k) to tax code intended as executive supplement to pensions. Companies realized: replace pensions with 401(k)s, shift all risk and cost to workers. By 1990s, most companies froze pensions for new hires. 1980s: Corporate Raids Companies discovered pension funds held billions in assets. Corporate raiders bought companies, terminated overfunded pensions, pocketed the surplus. Legal but devastating. Globalization and Competition: Companies claimed pensions made them uncompetitive vs. foreign firms without such obligations. They cut pensions to reduce costs and boost stock prices. Longer Lifespans: People living to 85-90 instead of 72 made pensions more expensive. Companies didn't want to fund 25-30 year retirements. Financialization: Wall Street promoted 401(k)s generating huge fees: mutual fund fees, advisor fees, transaction fees. Trillions in assets shifted from pensions (one fee) to millions of individual accounts (fees on each). Follow the money. #Retirement #Pension #401k #SocialSecurity #RetirementCrisis #FinancialPlanning #RetirementPlanning #Pensions #DefinedBenefit #EconomicHistory #LaborHistory #CorporateGreed #FinancialAdvisor #RetirementSecurity #BabyBoomers #Millennials #GenX #FinancialLiteracy #PersonalFinance #RetirementAnxiety