Comments on: IBM pension cutbacks in the US | Robbing the middle class

By: mike herald

mike herald — Wed, 21 Mar 2012 13:19:16 +0000

You've gotta be kidding me. I'm 43, work for ibm, and i'm going to get the worst of both worlds here. Please, i see that everyone is a professional on their own opinion here. Pensions vs. 401k's are not even in the same ball park. Speak to a financial advisor on this one, and not some moron typing away at his own opinion. For people who've worked for the company for 20 years and losing the factor of years of service, you're taking an enormous hit and you won't be able to recover unless your 40k pays out at double digit returns without fail for the next 10 years. The way things look, good luck with that one.

By: Naz

Naz — Sun, 14 May 2006 03:03:15 +0000

if you withdraw money from a 401k plan, how much taxes do you have to pay?

http://www.moneysavingfreetips.com/401k-max-contributions.html

it says here

The earlier you start maxing out your 401k plan, the more money you will have in your

retirement age. Infact, if you face financial difficulties in your mid-age, you can

withdraw some money from your 401k plan (this withdrawal is subject to local state taxes).

By: Alec

Alec — Sat, 14 Jan 2006 10:51:43 +0000

Well, this is interesting. If you save six per cent you can get the same contribution from IBM that you would have had without condition before the changes.

So that's an improvement? Interesting thought.

As you say, it does force savings. For people who plan to move companies it simplifies matters (a 401k plan is more portable than a company plan).

Otherwise it doesn't look like an improvement to me.

By: KC

KC — Fri, 13 Jan 2006 23:25:48 +0000

Thanks.

IBM will match 100% of our savings up to 6% of salary. On top of that, they will contribute another 2% (or 4% for certain employees who are closer to retirement age). So, I can get up to an 8% contribution from IBM if I save 6% myself. That's the same as their combined pension and 401K contribution before.

I'm not too worried about the economies of scale and risk. The 401k provides access to dozens of mutual funds that match the scale and diversification of a corporate pension fund. In any case, a fund as big as IBM's would run into significant diseconomies of scale, too. They have such large positions in their investments that they find it difficult to make a trade without altering the price in an unfavorable direction. That's one reason why most pension funds don't perform as well as market indices over the long run.

By: Alec

Alec — Wed, 11 Jan 2006 21:14:30 +0000

Thanks, KC, for the very interesting clarifications. Given the way most large companies are treating their pension funds (like a piggy bank to be turned upside down to cover new acquisitions), I can understand your enthusiasm for having control of your own pension package. On the other hand, a properly managed company pension fund can do things which individual investors just can't do on their own (economies of scale, spreading risk).

In any case, I hope it works out for you. I hope the IBM employees take advantage of the savings opportunity.

How much savings will IBM match, btw?

By: KC

KC — Tue, 10 Jan 2006 21:55:04 +0000

You make it sound like IBM executives are stealing existing retirement funds. That would be dastardly, for sure. But that's not what's happening. All existing pension balances remain intact, and will continue to accrue interest and to pay retirees exactly as before. Only future contributions will change. And it would be silly to call those changes a "robbery" or a "violation of the social contract".

I'm an IBM employee (an ordinary one--not an executive). The fellow IBMers I've spoken to prefer this new plan to the existing pension. For the vast majority of us, IBM will contribute the same amount to our retirement as before. The primary difference from our perspective is that the money will go into a 401K account that we own and control, rather than a pension account that the company owns and controls. We get to choose from a huge variety of low-cost mutual funds (including low-risk funds based on US Treasuries). In fact, many of us would like to have our existing pension balances rolled over into the 401k as well. But unfortunately that's not an option (probably because of government bureaucrats)

As far as I can tell, the people who are hurt by this will be those who don't use their 401K to save for retirement. For them, the solution is easy. Start saving. Now that IBM will match 100% of employee savings (up from 50%), the incentive for them to do so will be stronger. That's a good thing from a social perspective (have you seen the US savings rate?).

There are probably some IBMers who like the old way better. But don't misconstrue this as "robbing the middle class". As a middle-class IBM worker, I'm quite happy with this change.

By: Kristopher

Kristopher — Sat, 07 Jan 2006 10:48:37 +0000

that is typical B.S. to expect from large companies these days. Lets just piss on our faithful employees.

It is a kill to kill world, I would only suggest that every employee of IBM up and walk out. Let those in charge run around franticly like a chicken with it's head cut off. Fuck the big shots.