Interesting article on pension funds. Most assume a return of 8% and they are lucky to do 3-5% nowdays. Going for higher risk to catch up. Sounds good to me. Roll the dice! Whohoooo!
Searching for higher returns to bridge looming shortfalls, public workers’ pension funds across the country are increasingly turning to riskier investments in private equity, real estate and hedge funds.
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Inflation used to be a great cheat code for excessive debt spending. Pay off your debts with cheaper inflation dollars. Now with COLA and debt being issued in other currencies this doesn't always work.
Thomas Sowell: There are no solutions, just trade-offs.
The trouble with assuming an 8% return is that it makes the pension funds look solvent when they are not. I wouldn't worry since I don't have a pension anyway, but I can predict who is going to have to bail them out. Joe shmo taxpayer. LOL I read that private co. pensions funds are now using 5% and have already injected cash to compensate.
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Joe wrote: The trouble with assuming an 8% return is that it makes the pension funds look solvent when they are not. I wouldn't worry since I don't have a pension anyway, but I can predict who is going to have to bail them out. Joe shmo taxpayer. LOL I read that private co. pensions funds are now using 5% and have already injected cash to compensate.
Not necessarily true Joe. There is an argument to be made that any shortfalls are not the responsibility of the taxpayers to fund given that they have already contributed their "fair share" of funds to the public pension plan.
I hope you are right PS, I don't know what happens when the pension funds go broke. Some public unions have guaranteed bennys in their contracts. California unions are fighting in the courts right now I think. Maybe state/local bankruptcy is an option.
Good thing we still have Tabor here.
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All these private pension funds need to do to stay solvent is to borrow money from China. Or, they can just print money, raise payments, or reduce benefits. There is no need to stick to the terms you had back when your customers signed up. Just make them up as you go!
It's amazing how incompetent privite pension plans are since they haven't figured this out yet. Thank God our government knows better!
I am not finding it now but isn't there a clause in most state pension funds that if they default that the feds will cover it? Meaning we will pay for it? And why most public pension funds are worried about the riskier investments?
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"The problem with Socialism is that eventually you run out of other people's money." attributed to Margaret Thatcher
"A wise and frugal government, which shall leave men free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned - this is the sum of good government." Thomas Jefferson
mtntrekker wrote: I am not finding it now but isn't there a clause in most state pension funds that if they default that the feds will cover it? Meaning we will pay for it? And why most public pension funds are worried about the riskier investments?
I think Colorado taxpayers are responsible for PERA, something in the contract.
Thomas Sowell: There are no solutions, just trade-offs.
Private co. pensions funds are guaranteed up to about 50% of bennys by the Feds PBGC
State and local gov't pensions are not covered by the PBGC, that is the question, who is responsible?
In Cali the public unions are battling the state in court when they try to cut benefits or raise worker contributions.
Another difference between private and public, is I believe being regulated by the PBGC that the private pensions have to demonstrate they are fully funded. The public plans have more flexibility. I think I read Illinois is in big trouble, only about 60% funded. NJ too.
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