Americans concerned about their retirement pensions – pubic or private – will find this an interesting read! I worked for a public institution for a few years and taught public administration, so I am all too familiar with the dark future of public pensions given state finances and the experiences of cities declaring bankruptcy, such as Detroit.
Originally posted on Larry's Critique:
In Berkshire Hathaway’s most recent annual report, Warren Buffett discusses pensions. I have extracted pertinent paragraphs and pages relevant to the general discussion of pensions. For the complete report, see Berkshire Hathaway Inc. 2013 Annual Report available at http://www.berkshirehathaway.com/2013ar/linksannual13.html)
Local and state financial problems are accelerating, in large part because public entities promised pensions they couldn’t afford. Citizens and public officials typically under-appreciated the gigantic financial tapeworm that was born when promises were made that conflicted with a willingness to fund them. Unfortunately, pension mathematics today remain a mystery to most Americans.
Investment policies, as well, play an important role in these problems. In 1975, I wrote a memo to Katharine Graham, then chairman of The Washington Post Company, about the pitfalls of pension promises and the importance of investment policy. That memo is reproduced on pages 118 – 136. (Emphasis added.)
During the next decade, you will read…
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