"Unknowable" and "risk-free" seem to cancel each other out?
If I am buying an annuity today, sure. But if I "paid" for that annuity over a 40 year career of varying interest rates*, what then? I assumed this was one of the elements of "shared risk" of a DB plan.
Thanks for bringing up the total compensation aspect of teachers' pay.
"So teachers really got large raises in the form of their more valuable pension."
That is what my wife calls "ifcome".
Pensions are a long term commitment. What will the interest rates be in thirty years?
unknowable. but the market rate of their pension today is higher. and is risk-free.
"Unknowable" and "risk-free" seem to cancel each other out?
If I am buying an annuity today, sure. But if I "paid" for that annuity over a 40 year career of varying interest rates*, what then? I assumed this was one of the elements of "shared risk" of a DB plan.
*And varying wages.
Great column. Pensions are great, until they are not. Pensions do carry catastrophic risk. Some of them fail completely.