[FoRK] Chart of the Day...

J. Andrew Rogers andrew at ceruleansystems.com
Wed Jun 9 16:06:08 PDT 2010


On Jun 9, 2010, at 3:43 PM, Ken Ganshirt @ Yahoo wrote:
> First, the speculation. I assume you are referring to whatever investments the pension fund owns?


No, even if we ignore the investment aspect of it, which is also speculative, there is a large number of other speculative assumptions that must also hold true over very long periods of time for a pension fund to be solvent.  It doesn't take much to ruin the whole thing.

Having a margin of safety for when reality deviates from the myriad assumptions in a pension fund is very expensive such that most pension funds don't have much of a safety margin even when "fully funded". Unfortunately, reality has proven to rarely stay within that safety margin.  Hence why pension funds are either insolvent or inordinately expensive for all practical purposes.  The track record for long-term assumptions built into pension funds is pretty poor.





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