What do pension funds have to do with your practice? Underfunded pensions threaten states’ ability to survive fiscally and they threaten retirees’ daily lives. They also affect the stability of the capital markets.
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The quality of states’ fiscal conditions directly affects the quality of municipal investments.
The quality of retirement life directly affects social programs like healthcare and Social Security.
Many feel they can’t afford to retire. Twenty-five percent of US citizens have saved for retirement through work-based retirement plans, IRAs, and 401(k) plans.
Pension funds are contributing to a retirement crisis as the largest and most influential generation ever born grows older. Other retirement plans such as IRAs and 401(k)s don’t offer the same level of security for retirement life quality.
The attempt to fix the system is slamming into unprecedented budget deficits. Tax expenditure redistribution is the fear of financial industry participants if Congress focuses on providing greater security for poor and middle-income workers.
A better option would swap tax deductions for tax credits for the working poor. Labor groups want guaranteed retirement benefits for everyone. Business groups say plans should stay voluntary and advocate improving the system instead of scrapping it.
California just passed a bill that would create a savings plan to cover private sector workers with no retirement program. Other states may follow suit.
Pension plans contribute to the economy by creating large pools of funds that stay invested over long time horizons. They have a single mandate and ignore market fluctuations. That type of investment spurs job creation and innovation
The stakes are high for states and employers who currently bear all the risks for the plans. Spreading that risk among employers, workers, and the government—much like the European Union is trying to spread its sovereign debt risk—might be the answer.