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.
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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