Comment on Everyday AI looks more like the '08 housing bubble

• sugar_in_your_tea@sh.itjust.works ⁨16⁩ ⁨hours⁩ ago

  Pension is the correct English term

  I don’t think it is.

  A pension implies benefits are distributed to the person in retirement, usually with some fixed amount per month. My understanding is that in the UK, defined contribution plans are required to be invested largely in annuities by retirement, which satisfies that, whereas in the US, 401ks don’t have such restrictions. So a 401k could be depleated well before death, or be passed on to children as inheritance, unlike an annuity. There are required minimum distributions, but they don’t kick in until your 70s.

  If 401ks switched to a defined benefit plan at retirement, I could see calling it a pension. But since they’re not, I think that’s misleading, and employer sponsored plan makes more sense.

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  • julietOscarEcho@sh.itjust.works ⁨13⁩ ⁨hours⁩ ago

    Not true of UK defined contribution, you can do what you want just like a 401k, though it may be disadvantagous for tax purposes.

    It’s pretty normal in British English to use pension as a synonym for retirement account, though I can see why you don’t like that.

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    • sugar_in_your_tea@sh.itjust.works ⁨5⁩ ⁨hours⁩ ago

      Really? This is what I see with a simple search:

      When you’re able to take your pension, you can choose how and when you want the money. This usually includes the option of taking up to 25% as a tax-free lump sum and using the rest to get a guaranteed or variable income.

      Looking more into it, I guess it’s similar?

      The 401k typically doesn’t offer the guaranteed income, though I suppose some plans could offer annuities. You can choose to take fixed payments though, but there’s no guarantee how long that will last. I don’t know what the options are in the UK, but in the US, you can do whatever you like, as long as you withdraw the minimum (percentage of assets based on your age, starting at 73).

      I see a pension as having some kind of guaranteed benefit. A 401k doesn’t have that, so it doesn’t count.

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      • julietOscarEcho@sh.itjust.works ⁨1⁩ ⁨hour⁩ ago

        Yeah, again this is just semantics, a 401k in British English is 100% a pension. A UK defined contribution “workplace pension” is just a tax sheltered retirement account until it is annuitized, which is common and sensible but not necessary. The annuity is technically a totally different product, offered by life insurance companies (who interestingly with reference to above conversation would typically hold very little equity exposure backing it). Brits also call the equivalent to the social security retirement benefit the “state pension”. It’s a catch all for assets you use in retirement. Whether that’s used to fund an investment drawdown product or a life annuity or just taken out and splurged on a Ferrari makes no difference.

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  • Lucelu2@lemmy.zip ⁨14⁩ ⁨hours⁩ ago

    I am in the US. In regard to employer based retirement, there are a few pension programs still available, mostly union based. In other corporate environments that do not offer union pensions (as they are non-union)- they offer the 401K if a for-profit or a 403B if non-profit. As you get closer to retirement, many 401K/403B recalibrate to a larger proportion of Bonds vs riskier stocks/futures. Although I also invest in some ETFs that are not pretax (only the earnings are taxable).

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    • sugar_in_your_tea@sh.itjust.works ⁨6⁩ ⁨hours⁩ ago

      Right. OP’s point is that they call both defined benefit (i.e. what some union people get) and defined contribution (i.e. 401k and whatnot) a “pension.” My understanding is that a “pension” is a specific amount of money paid monthly in retirement (used to also just be the wage for certain jobs, not a retirement benefit).

      A quick search yielded “defined contribution pensions”, which seems to be a mix: your contributions are invested during employment, and then you get a fixed payment in retirement.

      With a 401k, there’s no fixed withdrawal in retirement unless you set one up, the only thing is a mandatory minimum withdrawal at a certain age (73?). My understanding is that wouldn’t be considered a pension since the withdrawal isn’t guaranteed or fixed, and you can withdraw everything if you so choose.

      Maybe I’m wrong and a pension is a looser term there, but my understanding is that a pension needs to have a guaranteed benefit in retirement.

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