Pensions ‘Cash Negative’ By 2016 – ‘Timebomb’ Looms
GoldCore
GoldSeek.com
Tuesday, 17 June 2014
The International Monetary Fund (IMF) cut its growth forecast for the United States on Monday and said the economy would not reach full employment until the end of 2017, allowing interest rates to be held near zero for longer than financial markets expect.
We have expected this for some time and it is bullish for gold and should be supportive in the coming weeks and months.
401 (K) Pensions ‘Cash Negative’ By 2016 – ‘Timebomb’ Looms
America’s sprawling 401(k) pension system will turn cash flow negative in 2016, threatening disruption for asset managers and selling of equities, according to analysis by Cerulli Associates, a research house.
The $3.5 trillion system attracted fresh contributions of $300 billion in 2012, with $276 billion either withdrawn as cash by retirees or rolled over into individual retirement accounts (IRAs), Cerulli estimated according to the FT. The IRA market is already larger at about $5.4 trillion.
However, by 2016 it forecasts that inflows will be $364 billion and outflows $366 billion, with the deficit only widening year on year after that as the core of the baby-boomer generation retires contributing to the pensions timebomb.
“This has significant implications for asset managers and other financial services providers,” said Bing Waldert, a director at Cerulli. “It is going to be a disappointment for a lot of fund managers that have put a lot of effort into the DC [defined contribution pension fund] market.
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