401(k) Plans Will Get More Fun
Also ChatGPT recommendations, sovereign debt glitches and seating charts.
Programming note: Money Stuff is off for the next two weeks, Elon permitting. We’ll be back August 25.
Historically one way to save for retirement is that you work at a company for a few decades, and the company pays you a salary, and then you retire, and the company keeps paying you a pension. The company has an obligation to pay you a certain amount every month, and it funds that obligation by putting money aside and investing it to make sure it has enough money to pay you. If it invests the money really well, it will have more than it needs to pay you, and it can keep the extra. If it invests the money badly, it will have less than it needs, and will need to kick in more money to pay you what it owes you. That outcome is bad, not only for the company (which has to kick in more money), but also for you, because it exposes you to credit risk. There is a law in the US, called ERISA (the Employee Retirement Income Security Act), which requires companies to manage their pension funds prudently, as fiduciaries for their retirees, so they don’t lose all the money.