Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

How to Escape the Pensions Squeeze

Personal_Finance / Pensions & Retirement Apr 15, 2015 - 02:58 PM GMT

By: Money_Morning

Personal_Finance

Peter Krauth writes: With mid-generation baby boomers just entering the retirement wave, their ability to stop working is a hot topic that's getting hotter. Study after study questions the ability of public and private pensions to meet the needs of retirees.

Financial repression through the Fed's Zero Interest Rate Policy (ZIRP) has compounded the problems of underfunded plans and retirement accounts.


And that's on top of publicly funded plans that already face massive shortfalls.

It's all pointing to one clear solution for hopeful retirees…

ZIRP Is Killing Retirement Yields

pension squeeze

Even after seven years of ZIRP, odds are that even when the Fed does get around to raising rates, it won't be by much. A recent report by global reinsurer Swiss Re says the Fed's ZIRP policy has cost investors $470 billion in lost income through the end of 2013. Why? Low yields are lethal for pension plans and retirees. The effective Federal Funds Rate (shown below) has effectively flat-lined.

But hey, that's not the Fed's problem.

Instead, they're much more concerned with the Treasury's ability to pay the interest on its massive debt.

What's more, 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. To get there, they'll require 9% yields, yet returns in just the 4% range are far more likely.

Consider the Detroit experience: Pension demands were a major contributing factor in the largest public bankruptcy in U.S. history. In the landmark Motown case, Judge Rhodes ruled pension benefits were not entitled "heightened protection in bankruptcy."

Now the state of Illinois is holding its breath, waiting for a Supreme Court ruling on a lawsuit by workers aiming to overturn 2013 pension reforms. If they're successful, it could cost the state $145 billion in increased taxes over the next 30 years.

Arizona's Supreme Court overturned 2011 reforms which were intended to restrict cost-of-living increases. But the system's already underfunded status (at just 67%) was ignored, contributing further to recurring deficits for a number of cities. In New York, the state and municipalities have resorted to deferring pension contributions, so long as they commit to repay later with interest. $3.3 billion in pension payments have been delayed since 2010… in New York State alone.

This is just a disaster in waiting. With historically low rates that show little, if any, sign of a substantial and sustained increase – no matter what the Fed would like us to think – it's all just a vicious downward spiral.

Meanwhile, employers are typically slowing or eliminating their policy of contributing to workers' 401(k) plans, and defined benefit plans are seeing benefits frozen or simply replaced with leaner plans.

According to a paper by the Center for Economic and Policy Research's David Rosnick and Dean Baker, the average American approaching retirement has just enough wealth to carry him/her just past three years.

But it wasn't always so dire.

Net worth grew considerably for 20 years, but then the stock and housing crash of 2007-2009 put a distinct end to that, as seen here.

how to invest for retirement

Yet recent work by the Boston College's Center for Retirement Research indicates people still aim to retire sooner rather than later. If they intend to follow through then there are only so many realistic options.

One is to keep working a few extra years, even if just part time. Of course, this lessens the time one needs to depend on savings alone, while simultaneously boosting the level of eventual Social Security benefits.

Whether or not Social Security will be able to pay what it promises, or even pay at all, is another issue altogether. Another vital consideration is health coverage by employers, which was much more widespread decades ago, boosting further the amount retirees need to live on today.

Build Up from Here

Low interest rates, underfunded pension plans, and a lack of savings combined with longer life spans means those preparing for or taking retirement need to save more and earn more… like it or not.

So what can you do to prepare?

Save more by diligently cutting where you can. There's nearly always some room, however little to trim. That will help you deal with the spending. As for income, look for relatively safe yield coupled with strong potential upside from capital gains. Right now I'd favor investment options outside the dollar given that other currencies are relatively undervalued.

WisdomTree International LargeCap Dividend ETF (NYSE Arca: DOL) provides an interesting mix of European and Asian large cap stocks while paying a (relatively) hefty 3.7% yield.

Of course the risk is not on par with treasuries, but the dividend return is commensurate.

Holdings in DOL are well-diversified across most major sectors like telecom, pharma, consumer staples, automotive, and financials. Adding to its stability, it boasts the biggest names within these sectors like China Mobile Ltd. (NYSE ADR: CHL), Novartis AG (NYSE ADR: NVS), Nestle SA (VTX: NESN), Toyota Motor Corp. (NYSE ADR: TM), and HSBC Holdings Plc. (NYSE ADR: HSBC).

DOL has $355 million in assets, incurs an expense ratio of 0.48%, and offers a current P/E of 16.

I expect foreign markets to outperform U.S. equities over the next year or two as they are in a more accommodative mode with QE, whereas the Fed has stopped (officially) and the U.S. bull market is getting long in the tooth. If you add DOL to your holdings, use a hard stop of $44.89 on a closing basis, and a 15% trailing stop to protect your profits.

Retirement looks increasingly challenging going forward, but there are things you can do to ensure you'll enjoy your golden years.

Editor's Note:For more opportunities to bolster your retirement funding (no matter how distant it may be), click here for Chief Investment Strategist  Keith Fitz-Gerald's twice weekly, no-cost Total Wealth research. 

Source :http://oilandenergyinvestor.com/2015/04/opec-just-confirmed-its-losing-the-oil-war/

Money Morning/The Money Map Report

©2015 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules