Retirement Benefit?

Is the 401(k) good for what ails us?

Recent discussion of municipal finance has focused on pensions. It seems that the State of New Jersey lied to investors when it masked the massive underfunding of its two biggest pension plans. Because of Article X of the U.S. Constitution, the Federal Government cannot sue a state. But that doesn’t mean that they can’t investigate fraud!

But New Jersey’s fraud is one thing. Underfunded pensions are another. Around the country, state pensions are underfunded by some $500 billion, according to their own accounting. But that probably understates the problem by $1 trillion or so. Thank goodness we live in New Hampshire. We’re only underfunded by some $4 billion. Since our state has a $60 billion economy, the 7% funding gap isn’t so far from NJ’s 10% gap. Hmmm.

So maybe state workers ought to have their own plans. Most of the rest of us do. Since lifetime employment hasn’t been part of the employment landscape for a long time, the 401(k) allows us to build our own retirement nest-egg and carry it with us from employer to employer. How about we give State employees the same privilege? We can’t do anything about folks who have already retired. But we could keep the problem from getting bigger by bringing state employees into the 21st century.

When you’re in a hole, the first rule is, stop digging. If our pension plans are underfunded, we ought to come up with a way to stop the problem from getting worse.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-05T20:12:19+00:00 August 25th, 2010|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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