{"id":25885,"date":"2017-09-20T19:53:27","date_gmt":"2017-09-21T00:53:27","guid":{"rendered":"http:\/\/olduvai.ca\/?p=25885"},"modified":"2017-09-20T19:53:27","modified_gmt":"2017-09-21T00:53:27","slug":"americans-dont-grasp-the-magnitude-of-the-looming-pension-tsunami-that-may-hit-us-within-10-years","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=25885","title":{"rendered":"Americans Don\u2019t Grasp The Magnitude Of The Looming Pension Tsunami That May Hit Us Within 10 Years"},"content":{"rendered":"<header>\n<h3 class=\"flipboard-subtitle\"><a href=\"http:\/\/www.mauldineconomics.com\/editorial\/americans-dont-grasp-the-magnitude-of-the-looming-pension-tsunami-that-may\/zhb#\">Americans Don\u2019t Grasp The Magnitude Of The Looming Pension Tsunami That May Hit Us Within 10 Years<\/a><\/h3>\n<\/header>\n<div class=\"body\">\n<p>Total unfunded liabilities in state and local pensions have roughly\u00a0<em>quintupled<\/em>\u00a0in the last decade.<\/p>\n<p><img decoding=\"async\" src=\"http:\/\/ggc-mauldin-images.s3.amazonaws.com\/uploads\/editorial\/170919_OP_Pension_image1.png\" alt=\"\" \/><\/p>\n<p><a href=\"http:\/\/www.mauldineconomics.com\/go\/v37d5p\/zhb\" target=\"_blank\" rel=\"noopener\">You read that right\u2014not doubled, tripled, or quadrupled\u2014quintupled.<\/a> That\u2019s nice when it happens on a slot machine, not so nice when it\u2019s money you owe.<\/p>\n<p>You will also notice in the chart that much of that change happened in 2008.<\/p>\n<p>Why was that?<\/p>\n<p><a href=\"http:\/\/www.mauldineconomics.com\/go\/v37d5s\/zhb\" target=\"_blank\" rel=\"noopener\">That&#8217;s when the Fed took interest rates down to nearly zero, meaning it suddenly took more cash to fund future payments.<\/a><\/p>\n<p>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 \u201cdiscount rate\u201d).<\/p>\n<p>Kentucky, for instance, has unfunded pension liabilities of $40 billion or more. This month the state budget director notified local governments that\u00a0<a href=\"http:\/\/www.mauldineconomics.com\/go\/v37d5w\/zhb\" target=\"_blank\" rel=\"noopener\">pension costs could jump 50\u201360% next year<\/a>.<\/p>\n<p>That\u2019s due to a proposed reduction in the system\u2019s assumed rate of return from 7.5% to 6.25%\u2014a step in the right direction but not nearly enough.<\/p>\n<p><strong>Think About This as an Investor: How Can You Guarantee 6\u20137% Returns These Days?<\/strong><\/p>\n<p>Do you know a way to\u00a0<em>guarantee<\/em>\u00a0yourself even 6.25% average annual returns for the next 10\u201320 years? Of course you don\u2019t. Yes, some strategies have a good shot at doing it, but there\u2019s no guarantee.<\/p>\n<p>And if you believe Jeremy Grantham\u2019s seven-year forecasts (I do: His 2009 growth forecast was spot on), then those pension funds have very little hope of getting their average 7% predicted rate of return, at least for the next seven years.<\/p>\n<p><img decoding=\"async\" src=\"http:\/\/ggc-mauldin-images.s3.amazonaws.com\/uploads\/editorial\/170919_OP_Pension_image2gray.png\" alt=\"\" \/><\/p>\n<\/div>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Americans Don\u2019t Grasp The Magnitude Of The Looming Pension Tsunami That May Hit Us Within 10 Years Total unfunded liabilities in state and local pensions have roughly\u00a0quintupled\u00a0in the last decade. You read that right\u2014not doubled, tripled, or quadrupled\u2014quintupled. That\u2019s nice when it happens on a slot machine, not so nice when it\u2019s money you owe. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[8226,7758,1816,827],"class_list":["post-25885","post","type-post","status-publish","format-standard","hentry","category-economics","tag-john-mauldin","tag-mauldin-economics","tag-pensions","tag-united-states"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/25885","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=25885"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/25885\/revisions"}],"predecessor-version":[{"id":25886,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/25885\/revisions\/25886"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=25885"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=25885"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=25885"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}