Warren Buffet's Warning on Public Pension Plans

With the municipal bond market not enjoying the best of times lately, the high profile bankruptcy in Detroit, the mess in Puerto Rico, and other cities not being in what you could call “the best of shape”,  along comes public pension plans in the news again.

As many of you know, we have covered pension issues in many past posts, including the most recent discussion on Are Pensions up for Grabs. However, a recent article on Warren Buffet's annual letter to Berkshire Hathaway shareholders, has brought the pension dilemma back to light as he discusses how public pension plans are so underfunded that we can expect to see multiple cities and perhaps states, follow in Detroit's footsteps, and declare bankruptcy.

Buffet stated, "During the next decade, you will read a lot of news – bad news – about public pension plans. I hope my memo is helpful to you in understanding the necessity for prompt remedial action where problems exist."

So what does this mean to you?

If significant income for your later years is dependent upon a public pension plan, it would be smart to have a backup plan, because we may see some of these public plans not being able to pay benefits as they run out of money.

Unfortunately, promises made aren't always deliverable. Our government, from the local level all the way to the federal level, have been spending money they don’t have, and as a result, the average person gets hurt when he finds out his/her pension benefits are less than expected. 

I recommend that you don’t put all your retirement eggs in one basket. Have a backup plan and focus on taking care of yourself. Otherwise, you may be in for quite a disappointment.

For the full article from Yahoo Finance click here: Here Comes 'A Lot of Bad News' About Public Pensions.

If you feel it's time to meet with a retirement planner, give us a call at (775)853-9033.

Chris Abts