Thursday, August 25, 2016

Pension train wreck accelerating due to low yields

We will keep blogging, until the republic falls, about our under-funded pensions.  Falling investment returns are accelerating the train wreck:

Société Générale’s Andrew Lapthorne illustrates the problem a different way. If someone today invested $100,000 in a balanced portfolio of stocks and bonds, they could expect a return of $21,800 over the next two decades after costs. Ten years ago, that same investor might have expected to make $60,000, and three decades ago $150,000.

Kudos to the Financial Times for picking up on this story.  Unfortunately, if past is prologue, few will read it and nothing will change.  

There are ways to avert a true social crisis. Mass poverty in old age can be avoided. But the options are unpalatable. “We will have to save more, work longer and simply lower our expectations,” says Joachim Fels, a global economic adviser at Pimco, the bond fund manager. “That’s the sad truth.”

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