Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Jim Jubak on the PBGC and risk
Old 03-03-2008, 08:24 AM   #1
Recycles dryer sheets
 
Join Date: Oct 2007
Posts: 463
Jim Jubak on the PBGC and risk

The year's scariest investing news - MSN Money
__________________

__________________
TickTock Rule Of Finance - heavily discount any promises of money/benefits to be paid to you in the future

"I've traded love for pennies, sold my soul for less" -Jim Croce, Age
TickTock is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-03-2008, 09:39 AM   #2
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,934
Anything jeopardizing pensions is pretty scary!

Looking on the bright side (if there is one), as I understand it the PBGC is going from 28% stocks, 72% fixed, to a new AA of 45% stocks, 55% fixed. The PBGC has to counter inflation, just as we (future) retirees will have to do. The new 45:55 AA (45% stocks, 55% fixed) will help them to keep pace with inflation, which may very likely be a significant factor at some point. 45:55 also happens to be the approximate, very conservative AA that I am planning for my ER, so I am putting my money where my mouth is.
__________________

__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 03-03-2008, 10:46 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
It shows me a few things:

1)PBGC is as underfunded as FDIC,except they face "real world" issues in that the insurance HAS been used in the past and will be in the future.

2)PBGC can't take many more big pension plans on from large companies going belly-up.

3)People are going to have to save MORE outside of their pensions, since when PBGC takes over a pension, in many cases it REDUCES the amount you would have gotten from the company pension..........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Old 03-03-2008, 11:04 AM   #4
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,695
Quote:
Originally Posted by Want2retire View Post
Anything jeopardizing pensions is pretty scary!

Looking on the bright side (if there is one), as I understand it the PBGC is going from 28% stocks, 72% fixed, to a new AA of 45% stocks, 55% fixed. The PBGC has to counter inflation, just as we (future) retirees will have to do. The new 45:55 AA (45% stocks, 55% fixed) will help them to keep pace with inflation, which may very likely be a significant factor at some point. 45:55 also happens to be the approximate, very conservative AA that I am planning for my ER, so I am putting my money where my mouth is.
The goal per the story though is not to keep pace with inflation but to maintain payouts for 10 years! I imagine their withdrawl rate must be in th 7-9 percent range. Any significant decline in the stock market in the coming years will ensure a bustout of this fund with that type of withdrawl rate.
__________________
Running_Man is offline   Reply With Quote
Old 03-03-2008, 07:06 PM   #5
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 2,951
Even without the riskier AA discussed in the article, It seems to me that the concept of pension fund insurance is highly risky in an age where DBPs are going out of style. No new healthy companies are paying premiums into the plan because they all use DCPs for employee retirement savings.
__________________
jazz4cash is offline   Reply With Quote
Old 03-03-2008, 07:53 PM   #6
Recycles dryer sheets
Culture's Avatar
 
Join Date: Apr 2007
Posts: 491
Quote:
Originally Posted by Want2retire View Post
Looking on the bright side (if there is one), as I understand it the PBGC is going from 28% stocks, 72% fixed, to a new AA of 45% stocks, 55% fixed. The PBGC has to counter inflation, just as we (future) retirees will have to do. The new 45:55 AA (45% stocks, 55% fixed) will help them to keep pace with inflation, which may very likely be a significant factor at some point.
I think you may be missing one thing here. I can afford to take risk with my investments, as I do not need the money. I have no debt, earn much more than I spend and even if I lost my business my assets would cover my spending at very small SWR. Thus, if the stock market has a bad run for 1o years, that is ok for me. I will not like it, but I will be ok.

You (Want2retire), can also probably carry through a downturn by cutting spending. You will not like it, but you will make it.

The PBGC, on the other hand, is broke. It spends more than it earns, is worth less than it owes, and cannot file for bankruptcy if it cannot meet it obligations. It cannot afford a 10 year downturn in the stock market.

Well, actually it can afford this, as they will just come and get the money from us. Wonderful!
__________________

__________________
Culture is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
PBGC Announces Maximum Insurance Benefit for 2008 template FIRE and Money 0 11-17-2007 11:01 AM
Jim from IL - ER this week? JDConnell Hi, I am... 13 07-20-2007 04:30 PM
Gearhead Jim says Hello Gearhead Jim Hi, I am... 1 01-26-2006 08:11 PM
Poor Jim Rogers wildcat Other topics 2 10-19-2005 06:27 PM
Jim Cramer wildcat Other topics 12 05-07-2005 08:35 AM

 

 
All times are GMT -6. The time now is 07:59 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.