Pension Bond Fiasco
According to the National Association of State Retirement Administrators,
There are more than 100 public retirement systems in the U.S. managing a combined $2.3 trillion.
The amount is $380 billion short of the funds needed to pay pensions over the next 30 years,
According to the Pew Center for the States: States also face a $381 billion liability for
retiree health care and other benefits they've promised public employees, and have only set aside $11 billion to fund that commitment.
Whats worse? The pension funds are selling bonds in an attempt to fund the gaps.
Pension bonds are a bet they can use the proceeds to help fill deficits in their retirement funds and still generate a higher return than what they pay in interest.
I.e. New Jersey sold $2.8 billion of the debt in 1997 and its pension gap has since ballooned to 10 times that amount. Why?
The 2000 market crash reduced the anticipated returns on the bond money that was invested.
It's like taking a second mortgage on a house you haven't paid for yet.
New Jersey Governor Jon Corzine: "It's the dumbest idea I ever heard."
Hattip to Bloomberg.
There are more than 100 public retirement systems in the U.S. managing a combined $2.3 trillion.
The amount is $380 billion short of the funds needed to pay pensions over the next 30 years,
According to the Pew Center for the States: States also face a $381 billion liability for
retiree health care and other benefits they've promised public employees, and have only set aside $11 billion to fund that commitment.
Whats worse? The pension funds are selling bonds in an attempt to fund the gaps.
Pension bonds are a bet they can use the proceeds to help fill deficits in their retirement funds and still generate a higher return than what they pay in interest.
I.e. New Jersey sold $2.8 billion of the debt in 1997 and its pension gap has since ballooned to 10 times that amount. Why?
The 2000 market crash reduced the anticipated returns on the bond money that was invested.
It's like taking a second mortgage on a house you haven't paid for yet.
New Jersey Governor Jon Corzine: "It's the dumbest idea I ever heard."
Hattip to Bloomberg.
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