Posted on 09/26/2012 5:17:34 PM PDT by SeekAndFind
Unfunded liabilities in pension funds are just as onerous as other kinds of debt. Such liabilities now total more than $2.5 trillion and are growing at a rapid pace.
No sooner had the Chicago teachers’ strike been settled than a new crisis emerged last week in the Windy City. The Chicago Teachers’ Pension Fund was reported to be on the brink of collapse. That fund is not alone. Although the troubles that plague the Social Security system get the most attention, similar dangers now threaten many other kinds of retirement funds.
Some plans are being inadequately funded, some have earned unexpectedly low returns, and some suffer from a Baby Boom bulge in the number of retirees. Moreover, the problems facing these funds will in many cases be harder to fix than those for Social Security. And the scale of the total potential shortfall is immense.
There are basically two types of retirement funds. Defined-contribution plans, such as 401(k)s and IRAs, are tax-advantaged accounts owned and largely funded by employees themselves (sometimes with additional contributions by employers). The only real risk for these funds is that the investments in the account may perform poorly. Over the past 12 years, unfortunately, most stocks have gained little or have actually declined in value.
As a result, many people approaching retirement today have far less money than they expected.
While such a shortfall is distressing, it doesn’t compare with the dangers posed by the other type of plan. So-called defined-benefit plans promise to pay benefits to retirees based on the length of time they worked and their former salaries. If these plans run short of money, they not only leave retirees unsure that their benefits are safe, they also create a potential cost for whoever has to bail them out (often taxpayers).
(Excerpt) Read more at business.time.com ...
2... husband lost his to bankruptcy....
Oh Happy Day!
Obama began the Illinois public pension crisis when he was a senator, which has caused Illinois to now be bankrupt.
Obama’s state pension scheme
September 19, 2012 | 11:51 pm | Modified: September 20, 2012 at 12:00 am
William Atwood, executive director of the giant Illinois State Board of Investment, told The Washington Examiner that Obama was relentless in applying pressure. “Anytime I saw him, he brought the issue up. I would see him in Springfield or I would see him at a function and invariably he raised the issue.”
William Atwood, executive director of the giant Illinois State Board of Investment, told The Washington Examiner that Obama was relentless in applying pressure. “Anytime I saw him, he brought the issue up. I would see him in Springfield or I would see him at a function and invariably he raised the issue.”
State Sen. Barack Obama and members of an Illinois lobbying group representing politically connected minority-owned businesses launched a campaign in 2000 to pressure state pension funds to help their friends and donors.
Obama and his cohorts targeted state officials in charge of pension funds for teachers, police and firemen, and regular government employees.
Much as the Rev. Jesse Jackson had been doing for years to Fortune 500 corporations, Obama and the Alliance of Business Leaders & Entrepreneurs, or ABLE, demanded that the officials set aside at least 15 percent of pension assets for management by minority-owned investment companies.
If their plan succeeded, the favored investment companies would add lucrative assets to their portfolios, which in turn would help push even more business their way.
John Rogers, Ariel Capital Management’s CEO, and James Reynolds, founder of Loop Capital, were ABLE leaders and longtime Obama supporters. Louis A. Holland, chairman of Holland Capital Management, was also an ABLE leader and Obama donor.
http://washingtonexaminer.com/chapter-viii-obamas-state-pension-scheme/article/2508424#.UGObuq6OxnE
We’re in the same boat on the self-funded retirement situation. The absolutely sick part is that there is another shoe to drop on this if Obama gets re-elected and we continue on our path - a federal bailout of profligate states and localities, mostly a result of their public pension obligations. The goal if for there to be no way to “vote with your feet”. Atlas Shrugged territory awaits.
“While there is no real risk that the Federal Government will be unable to pay promised benefits...”
lol
State Budget Solutions' third annual State Debt Report shows total state debt over $4 trillion.
Market-valued unfunded public pension liabilities make up more than half of all state debt, accounting for $2.8 trillion of the total. These market-valued pension liabilities provide a realistic view of the money owed to public pension systems as a result of years of skipped payments, borrowed funds, and inaccurate discount rate assumptions.
or they could just plain fail without burdening others.
The U.S. Postal Service will default this week on a $5.6 billion congressionally mandated obligation to pre-fund retiree health benefits, marking the second time in two months the cash-strapped agency has done this.
The Postal Service last month failed to pay $5.5 billion for its fiscal 2011 prepayment obligation, which originally was due in September 2011 but was deferred by Congress until Aug. 1. That was the first time it ever defaulted on a payment to the Treasury Department. The $5.6 billion due this week, on Sept. 30, represents this fiscal year’s obligation.
Wow that’s depressing.
Lou Holland used to be a regular guest on Wall $treet Week with Louis Rukeyser in the “good old days”.
I always thought he was a decent fellow.
Now I find out he’s a Baraqqi.
Well, it will be able to pay its promised benefits: in fiat that has been so substantially devalued that the benefits won’t buy much of anything. Gov wins again.
We have none and very little social security, we do have assets that should be able to get us through retirement though.
Yes, and when does someone put this together with the Fed buying all the bundled mortgages?
I’m in my 30’s, live in the NYC area, during my Uni years I met and became friednly with alot of people my age from the former Soviet, Warsaw Bloc, and Balkan Communist countries.
Many of them had parents and grandparents who lost almost their entire pensions to the hyperinflation caused during the collapse of the Soviet systems.
Met people my grandparents age, born over there, with professional degrees who lost everything,
Professors, Colonel, Merchant Marine Captain, Surgeons, Nuclear power plant engineer, all lost everything.
Pensions for full bird colonels went from a respectable Party Apparatchik retirement, to barely covering the cost of bread and milk each month.
I see no other possible path for the US, (and Australia), 100% of pensioners will lose something like 90% of the Purchasing Power f their Pension checks, and a good number of pensioners will lose all of their pensions.
The only reason we haven’t collapsed is due to QE and immigration of a work force.
Pension systems have never, do not, and will never work over multiple generations until the average surplus value of labor is an order of magnitude greater than the current world can produce.
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