Posted on 12/28/2022 7:21:31 AM PST by Red Badger
U.S. government pension funds currently have the lowest cash holdings since the 2008 financial crisis, and corporate pensions’ cash holdings are barely above the 13-year low they hit in 2021, which could spell disaster in the event of a financial crisis.
Over the past 15 years, public pensions had 2.45% cash holdings and private pensions had 2.07% on average, but those have dropped to 1.9% and 1.7% respectively, according to The Wall Street Journal. The figures were higher even in 2008, when some retirement funds had to sell at inopportune times to make payments; one economist told the Daily Caller News Foundation this could threaten Americans’ pensions in the event of a financial crisis, which could force funds to sell off assets at low prices in order to continue payments, resulting in a massive loss in value.
“The insolvency of many pension funds, which was caused by making promises that could never be paid, will eventually rear its head in a financial crisis — it is just a question of when the music will stop and who will be left without a seat,” E.J. Antoni, research fellow for regional economics at The Heritage Foundation, told the DCNF.
Keeping too much cash on hand can lower returns for pension funds, but keeping too little can end up forcing companies to sell assets at unfavorable prices just to keep cash on hand for payments, according to the WSJ. Low interest rates in recent years drove fund managers to exchange liquid cash for higher risk assets, failing to anticipate that rates would eventually rise, according to Antoni.
“This is part of the classic boom-bust cycle caused by the Federal Reserve’s manipulation of interest rates. The overleverage is not limited to pension funds, however, which is one reason why most businesses have slowed hiring or begun layoffs,” Antoni told the DCNF.
The $307 billion California State Teachers’ Retirement System had the equivalent of eight and a half years worth of benefits in liquid non-cash assets in November, down from ten and a half years in July, according to the WSJ.
Some funds are now pushing to build up their cash on hand in anticipation of a rocky 2023, which will likely include another rate hike from the Federal Reserve and may induce a recession, according to the WSJ.
The red flag is called “the below average Joe” in the Whitehouse.
By the time pension plans collapse I’ll be pushing up daisies.
“and who will be left without a seat,”
I’ll hazard a guess. The American taxpayer.
That’s who.
L
government pension plans are outrageous in the first place.
the government will take the last dollar from the last taxpayer, by force if necessary, to pay people not to work.....
after paying many of them to barely work for 20 or 25 years in the first place
Inflation is great for pension plans. Asset values increase, but benefit levels don’t. Just another example of how inflation steals from the savers.
Expect pension plans to look great in 10-15 years.
More importantly, the sociopaths who made the promises will be dead when the system goes belly up—leaving somebody else holding the bag.
It depends on whether the pension payouts have cost of living increases or not.
Most government pensions have those provisions.
Those 50 and under suckers can rage all they want ,but the people they voted for created this mess......ENJOY YOUR MISERY.....Don’t say you weren’t warned about the dem scams......
The obvious solution is for American citizens to have their taxes increased to pay for idiotic and exorbitant retirement agreements. Duh!
Think like a lefty!
Pensions have been mostly phased out over the last 20 years. Those grandfathered into pensions should be fine. Everyone since should have exclusive or overlapping 401ks and IRAs. Reason being, we all knew that pensions would eventually be unsustainable.
Yup—I am amused that the younger folks haven’t figured out the scam yet.
Stupid should hurt.
Ditto-I only regret I won’t be here to see the faces of the clowns and crooks who created this scenario!
Ditto-I only regret I won’t be here to see the faces of the clowns and crooks who created this scenario!
The numbers are that a little less than half of Americans have 401Ks, Roths or similar savings for retirement:
https://www.census.gov/library/stories/2022/08/who-has-retirement-accounts.html
European style “haircuts” for pension plans - to include social security.
Single person in a 3-bedroom house? Other people need those rooms. Take ‘em in and support them.
My pension plan is solvent and is sound, in part because my benefits are relatively low compared to the overly generous payments from “pie in the sky, magic money” plans like the Calif. Teachers plans. I’ll be pissed if taxpayers bail them out after they paid out so much irresponsibly.
Ya think?
More importantly, the sociopathic Congressmen and women who made changes to the retirement age for all of us will be dead when many of you decide you want to retire but you can't because of the income penalties Social Security places on you.
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