Mauldin: Americans Don’t Grasp The Magnitude Of The Looming Pension Tsunami

Wednesday, September 20, 2017
By Paul Martin

by John Mauldin via,
Sep 20, 2017

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.

The Rest…HERE

One Response to “Mauldin: Americans Don’t Grasp The Magnitude Of The Looming Pension Tsunami”

  1. Manny

    It has been suggested that those folks with IRA’s and 401K plans will have their savings replaced with government issued ‘toilet paper’ called bonds. That POS paper will gain interest most probably at the rate of one-half of one percent over the life of the T.P. When the sucker that owns the T.P. goes to cash it in they will find that there is only a brown spot on the T.P. and it is worth just the paper it is printed on. Good luck to one and all who do not put money away ‘somewhere’ out of harm’s way that will supply you with some sort of income on retirement.

    Those think they will fall back on S.S. are in for the shock of they little lives. The paper the FED provides you for your retirement won’t even be of value to wipe with.

    Social Security was an independent entity (trust) until that hack Johnson came along and put it into the general fund for congress and senate to steal. Once there it was used for anything and everything save what it was intended for. Good luck, millennials… you gonna work until the day you die.


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