HomeArticlesEconomicsConverting Public-Held Pension Funds to Private Accounts

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Converting Public-Held Pension Funds to Private Accounts — 3 Comments

  1. The American public is on its way to reaching a consensus agreement that the vision of financial retirement security is in reality an unattainable dream. Pensions once backed by industrial fortunes have run their course. They became obsolete and folded. In their place two kinds of retirement security were created. One for the average citizen – social security and another separate retirement fund for the employees of the state. Over time, as this article points out, the dream of government backed pensions were well intentioned yet nonetheless, they were ill conceived and turned out to be a poorly managed sham akin to a federally run ponzi scheme. A fiction perpetuated by willfull public ignorance, snake oil and aggregious political slight of hand. Sadly, we have no one to blame but ourselves for failing to heed the warningsT of economists for decades. Like passengers who purchased tickets to travel on the retirement bus, we are now facing the prospects of having to step off the bus and walk. Astute retirees will fall back upon private savings. Some people will perhaps make the retirement journey by hitchhiking with relatives. However, many millions of the baby boom generation face an uncertain and worrisome future. The times have changed. Saving for retirement shall now be defined as an individual responsibility. A few dollars set aside every week over a lifetime would be entrusted in 401K investment accounts. Hopefully with the assurance that the banks will fullfill their fiduciary duties to protect and grow the investments without risk. So, can the public be assured that the financial collapse of 2008 will not be repeated again in the future ? Are such safeguards even possible or will it be business as usual?

  2. Two Points need to added to this analysis:
    1) It has been said recently that over 30 states are so far in debt that they will either a) seek a federal bail out (no mas!) or b) severely cut essential services, causing further disruption and loss of trust. Another option – if congress would pass a law making it possible – is to declare bankruptcy and force the public employee unions back to the table to restructure wages and pensions to a sustainable level. As stated, times have changed and past guarantees cannot be met. Simple fact.

    2) It is a misnomer to label 401(k) accounts savings; they are investments and they are at risk, as we have seen. If people must save and be responsible for their own retirement, as they should, it is time to return to the basics. One such form that has been around for 200 years is Mutual whole life insurance and it is making a comeback. Designed properly, it can be a powerful vehicle for accumulation and control of assets.

  3. Yes, 401k accounts are investments with a percentage in the stock market. Many public pension funds are the same. There is no reason for retirees or the government to expect or provide any guarantees on such accounts as they are speculation, a form of gambling.

    If you want an absolute return on investments, they must not be based on speculation. Government bonds are as good as a government. That used to be considered sound, but there is also some risk that governments will go bankrupt because many governments provide poor fiscal management, relying on the power of taxation to repay rather than sound fiscal practices. However, you cannot get blood out of a turnip, and relying on force the create economic stability is also a form of speculation.

    I mentioned annuities in the article, not only because Ben Bernanke relies on them, but because they are based on cash reserves or equivalents adequate to pay out the life of the annuity. This is like having cash in the bank. It is not based on speculation but sound, and heavily regulated, actuarial principles.

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