State Pension Funds have $1 trillion shortfall

A new study says States have a $1 trillion pension gap:

States may be forced to reduce benefits, raise taxes or slash government services to address a $1 trillion funding shortfall in public sector retirement benefits, according to a new study that warns of even more debilitating costs if immediate action isn't taken.

The Pew Center on the States released a survey Thursday of state-administered pension plans, retiree health care and other post-employment benefits in all 50 states that blamed a decade's worth of policy decisions for leaving them shortchanged.

The result for some states will be "high annual costs that come with significant unfunded liabilities, lower bond ratings, less money available for services, higher taxes and the specter of worsening problems in the future," the study said.

The cost of the trillion-dollar shortfall, which will be paid over the coming decades, is about $8,800 for each American household. The study did not include many city, county and municipal pension plans, which are thought to have similar underfunding.

"We have a significant problem now, but it's a problem that can be solved by taking relatively modest steps," said Susan K. Urahn, the center's managing director. "If they don't do anything, if they wait, eventually they will have an unmanageable crisis on their hands."

As of 2008, states had $2.4 trillion to meet $3.4 trillion in promised pension, health care and other post-retirement benefits, according to the report.

Two things strike me. Firstly is how we have more bad news, with politicians and their bad management a major culprit.

But then, I am thinking about the fact now, many in the private sector, including many high level professionals have zero, nada, nothing to retire on. Between the layoffs and mortgages and credit cards and stock market crashes, there are many who have absolutely no retirement funds. Additionally private sector workers are most often not even offered a traditional pension plan.

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Glad you posted this, Robert

I'm working on a follow up to the (unfortunately, not too well written) healthcare cost post, tying together pension funds, private equity LBOs, heatlhcare costs and credit derivatives.

Thanks!

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we are retirement fund deficient on EP

literally as well as in topic. From what I can see the last generation to have retirement plans either are currently retired or just about to. Those below 60 are royally screwed because they pushed those 401ks and removed this as a benefit and this is in high paying career oriented professional jobs, never mind the working stiff. It might even be that the white collar professionals have less than the working stiff (blue collar) and that would be a nice thing to find out on.

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