There are no (retirement) Guarantees
Liberals like to argue that defined contribution pension plans, in which you and your employer contribute money and you invest it, don’t provide absolute protection, because you may invest the money foolishly or the whole market may go down. And they’re right. But it’s also true that a defined benefit pension plan, like those of Chrysler and General Motors, don’t provide absolute protection either. And one might add, as Megan McArdle does in a very wise blogpost, government pension plans don’t provide absolute protection either. Just read the recent stories about how CalPERS, America’s biggest public pension plan, long lauded for its sagacity, has lost oodles and oodles of money.
McArdle makes the salient point that government pension funds aren’t much better:
Er . . . look at the state of state pension funds. They’re often worse, because the private pension funds (now) have the government to sit on them and make sure their assets bear at least a theoretical relationship to their eventual liabilities. The government is rather too inclined to cut itself slack on that necessity.
That’s for sure.