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U.S. pension funds are underfunded even when allowing them their projected 8% annual return....

U.S. pension funds are underfunded even when allowing them their projected 8% annual return. Given a risk-free rate of 4%, not only is 8% unrealistic, but the scramble for yield could result in something worse. Imagine 0% returns for 20 years. "Fingers crossed and eyes closed" isn't an acceptable strategy.
Comments (7)
  • bbro
    , contributor
    Comments (10321) | Send Message
     
    8% unrealistic but so is 0% for 20 years...
    21 Jun 2011, 05:09 PM Reply Like
  • wyostocks
    , contributor
    Comments (8910) | Send Message
     
    Its closer to the zero than the 8.
    21 Jun 2011, 05:12 PM Reply Like
  • bbro
    , contributor
    Comments (10321) | Send Message
     
    Remember 40% of S&P 500 profits come from abroad....
    21 Jun 2011, 05:20 PM Reply Like
  • golongcheckdownmkt
    , contributor
    Comments (40) | Send Message
     
    there is no risk free rate when real rates are negative.
    21 Jun 2011, 05:10 PM Reply Like
  • Duude
    , contributor
    Comments (3398) | Send Message
     
    American pension plans ought to be looking at shorting the Euro against hard currencies. In about 3-5 years time American pensions might be fully funded.
    21 Jun 2011, 05:20 PM Reply Like
  • nobby73
    , contributor
    Comments (1177) | Send Message
     
    If you think about it, the Euro crisis is a consequence of it being a hard currency, as no member state is able to print money to resolve their debt crisis, unlike the US.

     

    This is why, despite all the problems, the Euro is still around 1.44.
    21 Jun 2011, 05:42 PM Reply Like
  • Duude
    , contributor
    Comments (3398) | Send Message
     
    Greece can't withstand a 20% cut to government spending for long. They will eventually default but only later and with more at stake. Imagine the contagion of that.
    21 Jun 2011, 05:45 PM Reply Like
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