Seeking Alpha

Retirement Advisor: Underfunded (Podcast)

by: SA For FAs
Summary

The House of Representatives last week approved a plan that would shore up multiemployer pensions serving 1.3 million blue-collar Americans, and permitting investing borrowed taxpayer money in the stock market.

The plight of these workers is tragically real, but the pathetic condition of these plans and the risk to taxpayers must also be noted.

According to the Heritage Foundation, 96% of those enrolled in multiemployer plans are in pensions that are less than 60% funded, implying a tidal wave of insolvencies could be looming.

The underfunding of these private plans pales in comparison with the underfunding of state and local government plans, whose problem is small in comparison to Social Security underfunding.

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The House of Representatives last week approved a plan that would shore up multiemployer pensions serving 1.3 million blue-collar Americans, and permitting investing borrowed taxpayer money in the stock market. According to the Heritage Foundation, 96% of those enrolled in multiemployer plans are in pensions that are less than 60% funded, implying a tidal wave of insolvencies could be looming.

This podcast (7:56) argues that advisors would do well to do the opposite of the current irresponsible spirit of the times. In contrast to legislation that would license investing in stocks to bail out an underfunded pension, advisors should build sound pensions that would undergird clients’ riskier ventures in stocks, secure in the knowledge that their basic needs are being met.