What a Difference a Couple of Years Make

So a couple years ago I'd been working for nearly 3 years since graduation.  My company has a pension plan, which I considered to be an anachronism of an earlier time.  It's completely beyond my control!  There's nothing I can do to save more or less.  Plus, everyone knows you change jobs too much in the modern economy for a pension to really make any sense.  I wasn't even vested in it and I had much more money in my 401(k).  Besides, what are the odds the pension program will even exist when I retire?

I complained about this to a couple friends who had worked there around 5 years (at the time) and they both said "Well, I figure that the company will have to buy me out eventually, so it doesn't bother me that much that it exists."

Two years and a financial crisis later, the pension plan is looking pretty attractive.  I actually read the plan details this afternoon!  Despite putting a lot more money into my 401(k) it's value by 50% of the money I put in - for every $1.00 I put in, I had $0.50 left.  Meanwhile, over the course of the last two years the cash-benefit value of my pension has doubled (between pay-based credits and interest credits).   Suddenly the idea of a pension isn't so terrible.

I imagine that I'm not the only person in there mid- to late-20's coming to this conclusion.  We heard all the conventional wisdom that the day of the pension was over and it was all about individual retirement saving accounts (401(k)'s, 403(b)'s, IRA's, etc.).  After this financial crisis I wouldn't be surprised to see people actually viewing a pension plan more positively.

One the lessons I've really taken from all of this is that there's a lot more bad advice out there than good advice.  I sort of always ignored the price appreciation in the real estate market because I didn't think that it was sustainable, but I was pretty shocked by how terrible the financial institutions of this country were run.  I can't be the only person that's going to wary of any investment advice for a few years.  Perhaps we'll see a resurgence of lower-return, lower-risk investments and savings.  

It might even be worth re-examining the aversion to defined benefits programs.  Many arguments that I've heard against defined benefits plans rest on the assumptions that the stock market will return 8% every year and that individuals are good at investing their money.  Now that we've had a stark reminder that defined contribution programs (like individually managed 401(k)'s) can lose a lot of money, perhaps we can work on how to make defined benefits plans work more effectively.  They can be costly to companies and governments, no shareholder likes a big earnings hit when the pension fund under-performs, but perhaps that's a price worth paying to allow workers to have some financial safety net for retirement.

It's a thought at least...