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What Did I Say About Pensions?

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May 31, 2010 – Comments (3)

Even if pension funds could earn the insane expectation of 8% per year, they are still underfunded, according to Kellogg School of Management.

This write up suggest just gutting pensions for new workers, ie sticking it to youth yet again.  I agree with defined benefit plans, where what's put into it is available to be paid into pensions and you do not end up going back and raping the tax payer and/or the company to pay for pensions because there was a miscalcuation on the costs of the pension.  The underfunded liability for these pensions has been going on for some people's entire working life and I don't agree this is a reason to stick it to taxpayers/companies.  People should have some responsibility in monitoring the pension and ensuring sufficient funds to what they expected to see paid out were going into the pension and to not sweeten them when the plans already had no hope of meeting expectations.

3 Comments – Post Your Own

#1) On May 31, 2010 at 8:02 PM, blesto (31.64) wrote:

Pensions are going the way of the Dodo.

Invest wisely and Foolishly

Cheers

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#2) On May 31, 2010 at 8:34 PM, dibble905 (87.78) wrote:

dwot,

There is a huge movement to move towards asset-liability management from the current asset-only framework. That is, pension plans are indeed attempting to learn from their mistakes as they have thus far. That is, simply looking at risk adjusted returns is not enough when your liabilities are ever increasing. The idea of the new framework is to match or exceed the returns required to cover your liabilities.

The road of the new route will be long, but with wide enough adoption and time, the underfunded issues we currently face will be reduced.

Patience.

The important thing to remember is that the current generation has used debt the most -- both on the government and citizen level. In so doing, I sincerely hope the burden of underfunded pensions and heavy debt will only be felt by those who foolishly consumed more than their incomes could ever support.

Passing along the blame to the next generation is what needs to be prevented here -- retaining the status quo of spreading out the burden needs to stop right here and right now.

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#3) On June 04, 2010 at 1:13 PM, chk999 (99.98) wrote:

Defined benefit pensions aren't viable long term. They completely divorce what was paid in by the worker from what will be paid out to the worker and that can't work. 

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