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.

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.

Faced with a $10-billion pension-funding deficit, one of Canada’s largest pension funds is considering a drastic proposal that would reduce benefits paid to retiring workers — or force them to work years longer for the same retirement income.