Underfunded State Pension Plans Pose Dramatic Risk

(Source: The Fiscal Times)

State pension programs across the country have undergone a major transformation, as more and more of them are cutting back the amount of money they set aside for retired workers, gambling that they can meet their obligations through investments instead of savings, according to a review by The Fiscal Times of the latest funding data.

A decade ago, slightly more than half the states in the U.S. had fully funded pension programs, but today only New York and Wisconsin can make that claim. Though the Great Recession has battered and drained most state budgets, New York and Wisconsin stand alone because they have kept up with their annual funding requirements in both good times and bad. (Fully funded pensions are mandated in New York; they are not mandated in Wisconsin.)

Here is the S&P list of the 10 worst funded state pension plans:

Illinois (50.6 percent funded)
West Virginia (56 percent funded)
Oklahoma (57.4 percent funded)
New Hampshire (58.3 percent funded)
Rhode Island (58.3 percent funded)
Kansas (58.8 percent funded)
Louisiana (60 percent funded)
Alaska (60.4 percent funded)
Kentucky (60.9 percent funded)
Connecticut (61.6 percent funded)

Years ago, a stable job with a pension program was the goal of every worker in America.  Unfortunately, today’s work force must prepare for their own retirement without relying solely on state funded pensions.  These pensions have been proven NOT to be immune from mismanagement, poor investing, and volatility in the markets.

Annuities offer a risk free solution which also accrue tax deferred.  Those approaching retirement age may want to look towards annuities as an option to protect and grow their retirement assets.  Consult a financial advisement professional for a full evaluation of your current retirement plan.

Investment Advisory Services offered through John P. Dubots Capital Management, LLC, CA License # 0822926