Re-Indexing Public Pensions

By James Kwak In the wake of the Detroit bankruptcy, Paul Krugman has a post pooh-poohing concerns about public pensions. His conclusion: “Nationwide, governments are underfunding their pensions by around 3 percent of $850 billion, or around $25 billion a year. A $25 billion shortfall in a $16 trillion economy. We’re doomed!” (Yes, that’s sarcasm.)

Big changes are coming to the broken U.S. retirement system, which in total is underfunded by at least $6.6 trillion, according to one analysis. All three pillars of retirement—Social Security, employer-sponsored plans and personal savings—have weakened in recent years. The time has come for “out-of-the-box thinking” and a “holistic” solution, Barbara Novick, vice chairman of asset manager BlackRock, said at a briefing on the firm’s latest retirement report.

Big changes are coming to the broken U.S. retirement system, which in total is underfunded by at least $6.6 trillion, according to one analysis. All three pillars of retirement—Social Security, employer-sponsored plans and personal savings—have weakened in recent years. The time has come for “out-of-the-box thinking” and a “holistic” solution, Barbara Novick, vice chairman of asset manager BlackRock, said at a briefing on the firm’s latest retirement report.

The Roth IRA is one of the most talked about and least understood financial tools.

A new and promising Dutch pension innovation is now being embraced in the U.K., and it’s all but certain to get a close look in the U.S. in coming months. Say hello to your likely future: the employer sponsored defined-ambition plan. The name doesn’t tell you much. It’s an obvious play on the two most common types of employer-sponsored plans: the defined-benefit plan, also known as a traditional pension, and the defined-contribution plan, most commonly a 401(k). By now, most people understand that employers generally have swapped out their traditional pensions for 401(k) plans.

A new and promising Dutch pension innovation is now being embraced in the U.K., and it’s all but certain to get a close look in the U.S. in coming months. Say hello to your likely future: the employer sponsored defined-ambition plan. The name doesn’t tell you much. It’s an obvious play on the two most common types of employer-sponsored plans: the defined-benefit plan, also known as a traditional pension, and the defined-contribution plan, most commonly a 401(k). By now, most people understand that employers generally have swapped out their traditional pensions for 401(k) plans.

On Monday, Spain reported that its debt-to-GDP ratio would hit 100% in 2014. Spain's public debt will soar to nearly 100 percent of output at the end of 2014, the government said Monday, despite massive spending cuts that have triggered angry street protests.