Pension Funds Set To Go Belly Up?
By Justin Gardner | Related entries in MoneyAnother bailout on the horizon?
It just keeps getting better and better…
Public pension funds across the U.S. are hiding the size of a crisis that’s been looming for years. Retirement plans play accounting games with numbers, giving the illusion that the funds are healthy.The paper alchemy gives governors and legislators the easy choice to contribute too little or nothing to the funds, year after year.
The misleading numbers posted by retirement fund administrators help mask this reality: Public pensions in the U.S. had total liabilities of $2.9 trillion as of Dec. 16, according to the Center for Retirement Research at Boston College. Their total assets are about 30 percent less than that, at $2 trillion.
With stock market losses this year, public pensions in the U.S. are now underfunded by more than $1 trillion.
That lack of funds explains why dozens of retirement plans in the U.S. have issued more than $50 billion in pension obligation bonds during the past 25 years — more than half of them since 1997 — public records show.
So what’s wrong here: A) the idea of pension funds so people have money to retire on or B) the investing strategy of those overseeing it?
I know my answer…what’s yours?
This entry was posted on Wednesday, March 4th, 2009 and is filed under Money. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
March 4th, 2009 at 6:41 pm
You see, you just don’t get it. If we all just did it the way the GOP wanted us to when Bush wanted to get rid of scoial security, we would all just be investing that money ourselves!
We don’t need any highly educated accounting crooks to lose our money for us; we can lose it all on our own.
(I am beginning to hate myself–about all I can muster these days are cynical and sarcastic responses..sometimes a combination of both)
March 4th, 2009 at 8:12 pm
Save your sarcasm for when social security and medicare go belly-up as well.
March 5th, 2009 at 6:16 am
We’re already on the hook for this one.
It’s called the Pension Benefit Guaranty Corporation and the potential liabilities are in the tens of trillions of dollars.
Tell me again how we’re gonna pay for all this ?
March 5th, 2009 at 7:54 am
This is not only an issue for public pensions but the few remaining corporate ones as well. Both government and corporations have a really good reason to not contribute money to pension funds (it can be spent elsewhere). For the short term gains of the stock market they take a long term risk. We are finding that risk is not something that we as a society deal with well. Risk mitigation costs money. There is nothing wrong with investing pension money in the stock market. It just needs to be balanced with risk mitigation.
This problem will only get worse because nobody want put money into pensions since a solid pension doesn’t buy you votes or make you more popular with your stockholders. In the end you have the government that will bail you out. As we have seen elsewhere the taxpayers are taking the risks and getting none of the benefits.
March 5th, 2009 at 8:12 am
I’m pretty sure what’s wrong with it is that for 3 decades overly generous fixed-benefit plans have by and large never been realistically adjusted for shifting demographics. The fault lies with all of us who lacked the will to face this.
The GOP was IMO always talking out its arses in suggesting that we could all flourish by investing privately in stocks without govt involvment to ensure a reasonable baseline. On average, people just aren’t smart enough or prudent enough. I never supported anything but allowing Americans to personally manage some small component of their SS contributions, above a baseline guarantee. Because it’s good practice and good education.
But ultimately the issue of what the GOP wanted to do with SS is a distractor. The much larger and more important issue facing America with pensions, SS and the currently economy is this: Americans individually and America collectively as a nation both have to figure out right now what our actual financial means really are, absent bubbles, bad advice from the financially unscrupulous, and unrealistic expectations about future growth. And then we have to live within the actual means that we really have.
The American dream only tells us what we want. Ruthlessly and scrupulously determining our means helps us figure out what we really truly CAN have. That’s something that my parents generation was extremely well aware of, and what my and future generations are now faced with refamiliarizing ourselves to.
March 5th, 2009 at 5:43 pm
As a San Franciscan, I can tell you what the problem is. It’s not A) or B).
It’s actually C) Unions with political power are able to lobby for ridiculously rich pension plans that are beyond the means for the municipalities and states to be able to support long term. If you saw how little it takes to be eligible for a full pension here in San Francisco and the State of California, it would make you cry. It’s basically a rape of taxpayers to pay for these unsustainable benefits. And the quid pro quo is that these unions are the foot soldiers for reelection of these corrupt politicians.
Thank you SEIU. May your organization go to hell.