On numerous occasions, I've told you to remain on lookout for threats to your savings, including the proposed new MyRA account.
If you've been counting on your pension, whether from work or even Social Security, you may want to revise those plans, as most are way underfunded.
Research by Bridgewater Associates, the world's largest hedge fund, estimates that 85% of public pensions could go bust within 30 years.
Public pension funds currently have about $3 trillion in assets, but will need to pay out nearly $10 trillion over the next several decades.
That would require average annual returns around 9%, but Bridgewater estimates they'll only earn about 4%, leaving pensions severely underfunded as paid benefits exceed contributions and returns.
Here and elsewhere, governments have bought votes by overpromising benefits that will never be honored...
The World's Biggest Pension Fund Just Made a Huge Bet
A recent announcement by the world's largest public pension fund, the $1.26 trillion Japanese Government Pension Investment Fund (GPIF), is very telling.
Prime Minister Abe has made good on his promise to reform the GPIF. The Japanese government just reorganized the pension fund's Investment Committee, with the ultimate goal of taking on riskier investments.
Clearly, Japanese officials recognize the lack of returns from low-yield government bonds, and the growing requirements of paying benefits to the world's second-oldest population.
But that's created a serious dilemma in Japan, and well beyond.
If one of the country's largest sources of demand for its own government bonds dries up, who will buy them?
It's enough to cause one to suspect that Japan's massive $1.4 trillion, two-year QE program to buy government bonds is in large part to compensate for GPIF's decreasing demand.
The World Pensions Council has warned that QE-prompted artificially low government bond yields would hurt pension funds, saying "without returns that outstrip inflation, pension investors face the real value of their savings declining rather than ratcheting up over the next few years."
The Problem's Not Just Abroad
I've been studying the struggles and failures of public pensions for years.
And I've long since concluded that these would face serious challenges, with a majority eventually unable to meet their promised commitments. It's not rocket science to realize that, for the most part, contributions + returns will never = obligations.
We all know about Detroit's $3.9 billion pension deficit, and how overly generous promises eventually led to its dubious distinction as the largest public bankruptcy in U.S. history.
What you may not know is that pension benefits to retirees, responsible for half the city's liabilities, aren't sacrosanct like most thought.
And it's starting to play out pretty much as I'd expected...
About the Author
Peter Krauth is the Resource Specialist for Money Map Press and has contributed some of the most popular and highly regarded investing articles on Money Morning. Peter is headquartered in resource-rich Canada, but he travels around the world to dig up the very best profit opportunity, whether it's in gold, silver, oil, coal, or even potash.