[quote=bearishgurl]
A 30 yr+ worker who has a DB pension is going to be fine. Ditto for the 25 yr+ worker with a DB pension and other investments or a 20 yr+ worker with a ~$500K net worth (exclusive of home equity) and/or spouse who also has a DB pension.
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Let’s think about where the money is going to come from to pay these DB pensions. Most pensions are heavily invested in various assets and assume a rate of return of 7-8%. Most of these pensions are still currently net buyers of assets but that should start to change in the next 5-10 years where they will become net sellers. Now if Gen X and gen Y are over indebted and don’t have any money who exactly are these pensions going to sell their assets too. What price are they going to get for those assets? Are those assets going to keep rising in price at the assumed rate of return if there aren’t many buyers that can afford them?
In the end whether you have a defined benefit plan or not you’re still ultimately relying on the ability and willingness of Gen X and Gen Y buying your assets or in other words trading a portion of their productivity for your assets. How safe is that assumption and what do you do if that assumption doesn’t work out.
