Excellent article. Between the national debt, state and municipal pension liabilities, and corporate pension liabilities, the country's future has been mortgaged. Unrealistic expectations for returns and unreasonable benefits for retirees have forced these pension plans to implement "Delay and Pray" tactics on their funds. Just like at the national level, someone needs to step in and make the unpopular, but necessary, decisions if they are to survive.
Unanticipated Consequences:
Unanticipated Consequences:
- Error: Funds are using assumptions that worked in the past, but appear to be way too rosy based on current (and expected future) fundamentals.
- Immediate Interests: Pensions were set up to take care of the then-current work force. They ignored the burden on the future work force's wallet. Additionally, realizing that they need higher returns to make up for the lost decade of 2001-2010, many funds have reach for yield recently by pouring money into higher risk investments like emerging market stocks. This may create an even larger bubble that will hurt even more than the real estate bubble when it bursts.
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