[quote=EconProf]Phaster: you are correct, sadly enough.
Pension plan managers essentially have to predict future outflows and future inflows in order to determine their solvency. The outflows are fairly easy to predict–# of pensioners, amount owed to each, their longevity, etc.
Inflows are future contributions from employees and employers, plus investment returns. Today’s politicians and pension managers overstate their likely future returns by saying it will be between 7 and 8 percent. (Private sector companies must be more realistic and are at about 4%). This allows government plans to push the true cost into the future, a future that is now arriving with a vengeance.[/quote]
what I find sad is there isn’t more understanding of the issue(s),… IMHO the sooner people wake up to the problem the better,… because as I see things stress on the system is building up AND at some point there might not be a way to reverse the damage done if various things blow up simultaneously
BTW you’re being too generous w/ your description of responsible financial professionals (if you are referring to CalPERS) because yet again there seems to be yet more bull$hit that they want to sweep under the carpet,…
[quote] CFO OUT AT CALPERS DUE TO QUESTIONABLE RESUME
CalPERS CFO ‘No Longer with’ Pension Fund
Departure comes after scrutiny over credentials, past work experience.
Just eight months after he was named the chief financial officer of the California Public Employees Retirement System (CalPERS), Charles Asubonten has departed following a controversy over his qualifications.
…Sources say Asubonten was asked to leave the retirement system after a review concluded he had overstated his work experience on his resume, including his job as managing director at a private equity firm,…
behavior WRT managing a pension portfolio,… which created the problem(s) in the first place
[/quote]
bottom line,… seems the idiots in charge of managing money (at the state and local levels) basically just have one unique ability,…. they squeeze taxpayers to pay for their mismanagement/corruption
[quote=EconProf]Again, think what a normal recession or stock market correction would do to these underfunded pension plans. Public services will be cut and taxes raised. People will flee the pension-irresponsible states like CA, NJ, IL, and go to the states with more honest and realistic public sector pension plans.[/quote]
as for “People will flee the pension-irresponsible states like CA,…” when TSHTF, sadly I don’t think there will be much shelter in other states simply because the way various pensions AND “derivatives” are structured,… the trend of financial markets being interconnected is ever increasing,… so FWIW one simple strategy I’m using is,… I’m trying to keep a majority of my power dry @ strong locally focused financial institutions that have no direct derivative exposure
