Mauldin: Americans Don't Grasp The Magnitude Of The Looming Pension Tsunami
Mauldin: Americans Don't Grasp The Magnitude Of The Looming Pension Tsunami - Hallo World !!! News Today in World, In this article you read by title Mauldin: Americans Don't Grasp The Magnitude Of The Looming Pension Tsunami, We've prepared this article well so you can read and retrieve information on it. Hopefully the contents of the post
Article Salisbury News, What we write can you understand. Okay, happy reading.
Title : Mauldin: Americans Don't Grasp The Magnitude Of The Looming Pension Tsunami
link : Mauldin: Americans Don't Grasp The Magnitude Of The Looming Pension Tsunami
You are now reading the article Mauldin: Americans Don't Grasp The Magnitude Of The Looming Pension Tsunami With link address https://newstoday-ok.blogspot.com/2017/09/mauldin-americans-dont-grasp-magnitude.html
Title : Mauldin: Americans Don't Grasp The Magnitude Of The Looming Pension Tsunami
link : Mauldin: Americans Don't Grasp The Magnitude Of The Looming Pension Tsunami
news-today.world |
Total unfunded liabilities in state and local pensions have roughly quintupled in the last decade.
You read that right—not doubled, tripled, or quadrupled—quintupled. That’s nice when it happens on a slot machine, not so nice when it’s money you owe.
You will also notice in the chart that much of that change happened in 2008.
Why was that?
That's when the Fed took interest rates down to nearly zero, meaning it suddenly took more cash to fund future payments.
According to a 2014 Pew study, only 15 states follow policies that have funded at least 100% of their pension needs. And that estimate is based on the aggressive assumptions of pension funds that they will get their predicted rate of returns (the “discount rate”).
Kentucky, for instance, has unfunded pension liabilities of $40 billion or more. This month the state budget director notified local governments that pension costs could jump 50–60% next year.
That’s due to a proposed reduction in the system’s assumed rate of return from 7.5% to 6.25%—a step in the right direction but not nearly enough.
Think About This as an Investor: How Can You Guarantee 6–7% Returns These Days?
Do you know a way to guarantee yourself even 6.25% average annual returns for the next 10–20 years? Of course you don’t. Yes, some strategies have a good shot at doing it, but there’s no guarantee.
And if you believe Jeremy Grantham’s seven-year forecasts (I do: His 2009 growth forecast was spot on), then those pension funds have very little hope of getting their average 7% predicted rate of return, at least for the next seven years.
More
You read that right—not doubled, tripled, or quadrupled—quintupled. That’s nice when it happens on a slot machine, not so nice when it’s money you owe.
You will also notice in the chart that much of that change happened in 2008.
Why was that?
That's when the Fed took interest rates down to nearly zero, meaning it suddenly took more cash to fund future payments.
According to a 2014 Pew study, only 15 states follow policies that have funded at least 100% of their pension needs. And that estimate is based on the aggressive assumptions of pension funds that they will get their predicted rate of returns (the “discount rate”).
Kentucky, for instance, has unfunded pension liabilities of $40 billion or more. This month the state budget director notified local governments that pension costs could jump 50–60% next year.
That’s due to a proposed reduction in the system’s assumed rate of return from 7.5% to 6.25%—a step in the right direction but not nearly enough.
Think About This as an Investor: How Can You Guarantee 6–7% Returns These Days?
Do you know a way to guarantee yourself even 6.25% average annual returns for the next 10–20 years? Of course you don’t. Yes, some strategies have a good shot at doing it, but there’s no guarantee.
And if you believe Jeremy Grantham’s seven-year forecasts (I do: His 2009 growth forecast was spot on), then those pension funds have very little hope of getting their average 7% predicted rate of return, at least for the next seven years.
More
That's an article Mauldin: Americans Don't Grasp The Magnitude Of The Looming Pension Tsunami
Fine for article Mauldin: Americans Don't Grasp The Magnitude Of The Looming Pension Tsunami This time, hopefully can benefit for you all. Well, see you in other article postings.
You are now reading the article Mauldin: Americans Don't Grasp The Magnitude Of The Looming Pension Tsunami With link address https://newstoday-ok.blogspot.com/2017/09/mauldin-americans-dont-grasp-magnitude.html