That is an excellent question but I don't have an answer for you because to give it requires arriving at a serious analysis of a contrafactual and I don't know how to do that going back more than almost fifty years now.
Hello dbr,
You have a pension.
If you didn't have a pension what would your AA have been all the years?
Would you have allocated more to stocks to increase total return?
I would assume it would have been necessary.
Probably what is true is that the pension enables retiring sooner and living at a higher standard of living or perhaps just dying with more money. But there is another consideration. One of the moving parts that needs to be accounted for is that the pension is part of the total compensation and benefits and should my former employer not have offered a pension then other compensation would have been offered. That means basically a bigger paycheck but no pension. At a point that employer stopped offering pensions and increased benefits such as 401k match, profit sharing, RSUs, and MSOs for qualifying employees. Everyone was given a choice at that point to freeze the pension and take the benefits or eschew the benefits but continue to gain pension credits. So I guess it is hard to say how that would shake down to asset allocation when that contrafactual was never realized.
If you focus the analysis on asset allocation in retirement there are also considerations. One of them would be whether a person without a pension would create one by buying an SPIA. Probably for me that would have been seriously considered. In that case you end up right where we actually are, more or less. Note the SPIA not being inflation indexed is not different from the actual pension I have not being inflation indexed, which it is not. Also there was no offer of a lump sum option, so that is another unanalyzed contrafactual.
Statistics: Posted by dbr — Sat Apr 27, 2024 7:32 am — Replies 86 — Views 7130