Whether in political history or analyzing spreadsheets of historic data, when looking back we need to be very aware of where we are looking back from.
Yes, a higher return on plan assets reduces the funding requirements for the pension plan and the expense that the sponsor must report. But the plan’s true economic cost is independent of the investment performance of the plan assets.
The sustainability of traditional public sector defined benefit (DB) plans has become front-page news and the subject of acrimonious debates usually framed in stark terms of DB versus DC (defined contribution). This either/or framing is unhelpful: It simply perpetuates the strongly held views of the defenders and critics of these two opposing pension models.
Retirement security is a key area of focus for the Future of Finance initiative at CFA institute, and we hosted an online forum featuring a panel of experts with varied backgrounds and perspectives to examine the size and scope of the public pension funding gap, debate its causes, and to consider potential solutions.
Over the past decade, the funding gap for US public pension plans has widened considerably, and many state and local plans today find themselves in desperate straits, facing an aggregate shortfall in excess of $4 trillion.
Mandatory retirement savings accounts is a hot topic, as evidenced by buzz around Meir Statman's recent article in the Financial Analysts Journal, as well as the number of recent articles and blog posts tackling the issue of pension security. While a number of people are calling for mandatory retirement savings for employees in the United States, there is vigorous debate as to whether this is the way forward.
Over the past two decades, the story of the Ontario Teachers’ Pension Plan has spawned a growing number of investment institutions explicitly based on Peter Drucker’s design principles. These institutions, according to Keith Ambachtsheer, are our best hope for articulating and implementing the truly long-horizon, wealth-creating investment programs that workers everywhere will rely on for their future prosperity.
Financial advisors have an increasingly important role to play in building sustainable retirement income strategies for their clients. But as is the case with most investment advice, there is no one-size-fits-all approach. To help advisors and investors sort through the issues here is a list of essential reading and resources.
Three practitioners offer some straightforward suggestions for changing the trajectory of the financial profession.
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