The Arrival Of The 'Unavoidable Pension Crisis'


  • I wrote an article in 2017 discussing the “Unavoidable Pension Crisis.” At that time, most did not understand the risk.
  • Since then, the situation has continued to worsen.
  • COVID-19 pandemic has likely triggered a rolling pension collapse over the next couple of years.

In 2017, I wrote an article discussing the “Unavoidable Pension Crisis.” At that time, most did not understand the risk. However, two years later, the “Unavoidable Pension Crisis” has arrived.

To understand we are today, we need a quick review.

“Currently, many pension funds, like the one in Houston, are scrambling to marginally lower return rates, issue debt, raise taxes, or increase contribution limits. The hope is to fill the gaping holes of underfunded liabilities in existing plans. Such measures, combined with an ongoing bull market, and increased participant contributions, will hopefully begin a healing process.

Such is not likely to be the case.

This problems are not something born of the last ‘financial crisis,’ but rather the culmination of 20-plus years of financial mismanagement.

An April 2016, Moody’s analysis pegged the total 75-year unfunded liability for all state and local pension plans at $3.5 trillion. That’s the amount not covered by fund assets, future contributions, and investment returns ranging from 3.7% to 4.1%. Another calculation from the American Enterprise Institute comes up with $5.2 trillion, presuming that long-term bond yields an average 2.6%.

With employee contribution requirements extremely low, the need to stretch for higher rates of return have put pensions in a precarious position. The underfunded status of pensions continues to increase.”

The Crisis Is Here

Since then, the situation has continued to worsen as noted by Aaron Brown in 2018:

“Today the hard stop is five to 10 years away, within the career plans of current officials. In the next decade, and probably within five years, some large will face insolvency,

We are already there. Here was the key sentence in Brown’s commentary:

The next phase of public pension reform will likely be touched off by a stock market decline. Such creates the real possibility of

This article was written by

Lance Roberts profile picture
Unique, unbiased and contrarian real investment advice

After having been in the investing world for more than 25 years from private banking and investment management to private and venture capital; I have pretty much "been there and done that" at one point or another. I am currently a partner at RIA Advisors in Houston, Texas.

The majority of my time is spent analyzing, researching and writing commentary about investing, investor psychology and macro-views of the markets and the economy. My thoughts are not generally mainstream and are often contrarian in nature but I try an use a common sense approach, clear explanations and my “real world” experience in the process.

I am a managing partner of RIA Pro, a weekly subscriber based-newsletter that is distributed to individual and professional investors nationwide. The newsletter covers economic, political and market topics as they relate to your money and life.

I also write a daily blog which is read by thousands nationwide from individuals to professionals at

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