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The Next Retirement Crisis: America’s Public Pensions

Oct 25, 2018 | Richard Eisenberg |

The Next Retirement Crisis: America’s Public Pensions

Written by Richard Eisenberg via Forbes

You may be saying to yourself: I’m not a teacher, police officer, firefighter or municipal worker, so why should I care whether public-employee pension plans are underfunded. Here’s what [PBS correspondent Martin Smith] told me: “About half the states have pensions that are 70% funded or much worse. The states can’t borrow or sell bonds to China.” So, Smith adds, in four or five years, some of those states will likely have to either cut their services (the equivalent of a state bailout) or they will need a federal bailout.

And a federal bailout “is more of a problem for everybody,” Smith notes. “That’s why we all should care.”

You might also care because of all the unfulfilled promises made to public employees around the country. As Smith explains in his program, many public servants accepted their jobs and the less-than-fabulous salaries that came with them partly because they knew they could count on decent pensions with regular, guaranteed income in retirement. Now they fear that safety net has seriously frayed and their retirement may be in jeopardy.

What Happened in Kentucky

[PBS FRONTLINE’s documentary] The Pension Gamble focuses on Kentucky’s severely underfunded pension plan, Kentucky Retirement Systems (or KRS), one of the most problematic state plans in the country, with a shortfall of an estimated $36 billion. Its pension fund managers rolled the dice with hedge fund money managers who allegedly charged exorbitant fees (often without disclosing them) and whose investment performance disappointed.

A class-action lawyer suing KRS says on The Pension Gamble: “Kentucky may be the first to go down, but it won’t be the last.”

The personal toll is poignant. One Kentucky police officer tells Smith during the program: “The pension benefit was a big deal. I knew that after twenty years of a career, my wife and I would have health insurance and I would have some kind of pension.” Now he’s not so sure.

So what happened in the public pension world? To offer an example, Smith paints a bleak tale in Kentucky, filled with KRS’ rogue Wall Street money managers, inexperienced — if not incompetent — local pension fund managers and unwitting state employees.

Read the full article at Forbes.com: The Next Retirement Crisis: America’s Public Pensions | Forbes