Originally Posted by
Bohica
Much of which would be eaten up by taxes.
"Deferred" compensation is ideal because you don't pay taxes on it while you are making the big bucks, you wait until you are only drawing on that pension to pay the taxes, which presumably (unless you still had other income from other ventures) would be much less after you retire.
Defined Benefit plans put the risk of future earnings on the company instead of the individual. They are very valuable, so long as the company remains solvent and keeps its promise to pay.
The problem isn't with the DB type plan, the problem is with companies that refuse to keep their word and politicians (and citizens) who allow them to do so.
Try asking a government employee with a DB plan to give it up in exchange for a 401K. They will look at you like you have 13 heads. That is because they "know" that the government will "always" be there to keep their promise of that defined benefit pension.
Imagine the federal government reneging on their promise to pay military retirements. Don't think you'd get nearly as many people to serve their country for 20 years if they thought there was a chance they wouldn't receive the pension they were promised.
Pension plans are an excellent retirement vehicle, as long as the entity that promises to pay keeps that promise.
Not to mention that 30% pay raise would be a huge drain on the A Plan as all the guys retiring in five years just realized an unforecast 30 %increase in A fund payouts.
I have seen some major changes to the military A Fund in the last 20 years and expect a lot more in the future. If there are any A Funds left in the next 25 years I expect it will be us, brown and Uncle Sam. If I were 30 years old and worked at FEDEX I don't think I would be counting on my FEDEX A FUND 35 years from now though.