Wednesday, September 21, 2016
More pension bad news
The $1.9 trillion shortfall in U.S. state and local pension funds is poised to grow as near record-low bond yields and global stock-market turmoil reduce investment gains, increasing pressure on governments to put more money into the retirement systems.
There’s little light at the end of the tunnel as far as pension funding is concerned,” said Vikram Rai, head of municipal-bond strategy at Citigroup Inc. in New York. “I expect funded ratios will drop further. It’ll require increased pension contributions on the part of the states and local government, but most state and local governments don’t have the ability to do so.”
“If markets are flat or negative in upcoming years, we will continue to lose principal at a double digit rate,” Jim Mohler, executive director of the fund, told lawmakers in Chicago on Monday. “The projected insolvency for the fund will escalate.”
The politicians will try and raise taxes to pay the shortfall but in the end the people in these plans will have to take a hit. Taxpayers, many of whom have no pension, are not going to like to see their taxes go up to pay lavish municipal employee pensions. Receiving less government services because the money is diverted to pensions will not sit well either I would venture.
If you are an employee that is vested in a pension plan I would pay attention to your administrates annual review of the plan and determine whether it is fully funded of underfunded. When I ask most people they have no idea. Not knowing the condition of the plan you are relying on for retirement is just plain dumb.