Reversal of Fortune: Inside Pensions and the Erosion of Retirement

Published on
February 21st, 2020
28 minutes

The Big Story – Tiananmen to Hong Kong: The Fight for Democracy

Reversal of Fortune: Inside Pensions and the Erosion of Retirement

The Big Story ·
Featuring Edward Siedle, Roger Lowenstein, Teresa Ghilarducci, Leo Kolivakis, Paula Bailey, David Meikle, and more

Published on: February 21st, 2020 • Duration: 28 minutes

How did the promise of a stable pension and a happy retirement, once the pillar of the American dream, become a threat to the solvency of state governments across the U.S.? Over the past decade, the funding-gap for public pensions has exploded to record levels. While blame is often placed on politicians short-changing contributions, hardline union leaders, and a host of other factors, one largely misunderstood and ignored component is the management of the pensions themselves. As many of their assets failed to deliver expected returns, pensions doubled-down on high-risk, high-fee investments, hoping to shore up more money. That shift in investments has eroded transparency, which has made it increasingly difficult to follow the money – not only putting at risk the retirement of millions of Americans, but the funding of state budgets and the health of the entire economy. Filmed in New York, Massachusetts, Arizona, Florida, Rhode Island and and other locations in 2019 and 2020.



  • TS
    Taranvir S.
    21 March 2020 @ 06:04
    Wall Street has issues with incentives and finance is excessive
  • JG
    John G.
    18 March 2020 @ 17:09
    So these professionals gave up the responsibility for their own retirement to government. Mostly I'm sure, they are the same ones who voted for bigger and bigger government. As sad as this is, I think they ultimately got what they voted for. And they/we have not seen anything yet. If you're worried about income disparity between the rich and poor, look no further than our officials talking about bailing out the companies who went into debt to buy their stock back so executives can get a big bonus. I would be in favor if the companies had to first sell all their stock to support their biz and all the executives had their bonuses clawed back for 5 years. But that justice unlikely to happen. End the FED.
  • TL
    Thomas L.
    15 March 2020 @ 02:41
    This is really sad. Can't believe people have so little empathy in the comments below and have made it political into republicans vs democrats thing.
  • ST
    Simon T.
    21 February 2020 @ 11:40
    Trust in big money managers and government is already low but jt will fade away faster than the Arctic ice! Feeling sad for those millions of honest middle class workers who are being cheated by reckless financial engineers
    • JC
      John C.
      4 March 2020 @ 10:31
      Plenty of blame to go around -- read some of the comments. State and city governments are very culpable here as are the public unions. Should not be allowed to have public unions it's a total conflict of interest as this crisis shows.
  • EK
    Edward K.
    21 February 2020 @ 15:50
    Have been watching this series on Retirement and possibly one of the consequences of these anticipated defaults and tax payer liabilities is that the municipal bond market may get severely roiled. Muni's are regarded (generally speaking) as safe, dependable sources of (low) income often with tax advantages. This landscape could change and become more of a distressed arena.
    • JC
      John C.
      4 March 2020 @ 10:30
      Munis got hurt bad in the crisis in 2008 and basically had to have government administer them if I recall correctly. What a mess that was. I didn't know what was going to happen to my munis for several weeks.
  • JP
    John P.
    21 February 2020 @ 18:03
    This is a huge issue but I have a hard time generating empathy for people receiving reduced pensions. Simple idea: just go back to work, literally anywhere, like every other person would have to do. Working only 37 years and expecting me to pay your bills while I have to raise a family? People should work 50-55 years.
    • TR
      Travis R.
      22 February 2020 @ 01:09
      I agree. It is hard to have sympathy for most of the people receiving reduced pensions. They obviously did not pay attention 30 years ago to know that the math did NOT add up and demand accountability. Nor did they save and invest like they should have. I know retirees who are receiving upwards of $10k per month from the local electrical workers union. While new hires will receive no more then $4k for the same time worked. Think about this disparity adjusted for inflation in 30 years! This is a consequence of the Baby Boom generation living in large off the backs of their children. Unconscionable and unacceptable.
    • JC
      John C.
      4 March 2020 @ 10:28
      I also have a hard time feeling sorry for most teachers who either explicitly or tacitly supported these corrupt public teachers unions and have spent us into oblivion with their pension benefit schemes. If they had been reasonable and not layered in millions of bogus administrative jobs I would have more sympathy. Also re teachers US test scores are terrible and the youth are much less competitive than 20-30-40 years ago.
  • DH
    Dale H.
    21 February 2020 @ 21:02
    The sad thing is that I saw this coming decades ago - why do you think corporations were dumping defined benefit plans? I say get rid of pension plans altogether, pay people cash and allow them to fund IRA's. This is worse than if you had just paid them more in cash - even if they didn't save for retirement, they would have had more money to enjoy earlier.
    • JC
      John C.
      4 March 2020 @ 10:25
      Totally agree. The politicos just steal anything stashed in a government-controlled account like they have with pensions. Better to have the person in control and to get rid of defined benefits.
  • DH
    Dale H.
    21 February 2020 @ 21:05
    You know what I like about oversaving and underconsumption? Peace of mind. I may never spend that money, it may all go to others, but I am content knowing the downside is covered. The governments are going to print like mad to at least cover the nominal promises, but gold and gold stocks are going to be the big beneficiary. I have a heavy weighting in Pure Gold Mining.
    • JC
      John C.
      4 March 2020 @ 10:24
      Once the real pension crisis hits they will print like crazy. Only way to save the Federal pension schemes I would think. City and state governments might face the reckoning sooner and have to make benefit cuts. Any way you slice it if you are a private sector 401k investor or a government pensioner you're going to get back less than 50% of what you put in, inflation-adjusted, and it might eventually be pennies on the dollar.
  • FS
    Franz S.
    22 February 2020 @ 01:26
    All of these US public employee pension plans were known to be over-generous for the past forty years. Oregon PERS is typical. You have government leaders, legislators, judges and teachers all pushing fat benefits through, with no prudent plan of funding, and dollar signs in their eyes. Now they cry of broken promises when there is talk of benefit cuts?
    • JC
      John C.
      4 March 2020 @ 10:21
      On top of that they layered in countless comfy but needless administrative jobs for their cronies who get even bigger benefits putting pressure on the entire state funding programs.
  • KT
    Kai T.
    22 February 2020 @ 04:57
    I REALLY enjoyed and got a lot out of these last two weeks. Superb work. An entire 2-week series on retirement and Generation X was barely mentioned. Was there an idea or fact that related specifically to Generation X from this retirement special ... I come up with nothing. Perhaps someone else remembers something? It's not surprising to be ignored by the baby boomers or millennials — but Real Vision is lead and owned by Baby Boomers.
    • SS
      Shanthi S.
      22 February 2020 @ 08:55
      I don’t think Raoul is a boomer! :)
    • RP
      Raoul P. | Founder
      22 February 2020 @ 09:56
      haha...We are squarely Gen X as founders.
    • JC
      John C.
      4 March 2020 @ 10:20
      GenX...the Forgotten Generation :))
  • WP
    William P.
    24 February 2020 @ 04:47
    The Public Employee Unions are as guilty as the Governments for causing this problem. I live in California where both parties continue to dig a deeper hole.
    • JC
      John C.
      4 March 2020 @ 10:18
      They are almost exclusively Democrats, correct?
  • JC
    Joseph C.
    24 February 2020 @ 14:21
    In a microcosm, this typifies the problem with every major issue in this country: 1. No ownership of the problem- didn't hear one person say they, the teachers, were part of the problem. They extorted the State for unreasonable benefits. 2. No realism of the problem- what reason should the person with no savings, no pension and living on Soc Sec take money out off their pocket to make the teachers whole? 3. No holding the real villains responsible- far as I know the teachers still have their same Union and RI still votes Democrats into office
    • JC
      John C.
      4 March 2020 @ 10:17
      You got it. Public services unions think the money gravy train just goes on forever and they can just tax the state residents to make up any shortfalls. And the that government is the solvers of all problems when it clearly is not, and in fact is a wasteful, inefficient and bloated bureaucracy that one should be very Your point #2 is very important. It used to be that public workers exchanged lower current income and benefits for long-term job security. While the private sector had better salaries and benefits. Now that is clearly not the case as public workers have job security, the same healthcare benefits, pension schemes...whereas private workers have zero job security & can be fired on a whim, generally have no pension, and have similar (if not worse) healthcare benefits and salaries.
  • KC
    Kenneth C.
    24 February 2020 @ 14:28
    There's been a growing argument in the last few years against 401ks and that we should return to the guarantee of pensions. A true argument for that is participants lack financial education and under perform sometimes. This is the counter argument. In a perfect world, government, corporate, and union employees would do their job, would act in a fiduciary manner over these funds. To be man is to err, and these last 70 years plus have been a casebook example of that.
    • JC
      John C.
      4 March 2020 @ 10:10
      Defined benefit schemes are exactly the problem here. 401ks are vastly superior for the state and the citizens who own them. What this video leaves out is how the public unions end up pulling the strings re who gets elected, then have these usually Democratic politicians award themselves big pension and benefit schemes and layer in administrative layers of bureaucracy everywhere. This creates a huge, bloated system that cannot possibly afford all the benefits promised. I feel sorry for these people, but given the poor performance in schools and crazy social policies they have implemented in the school systems it's not hard to see that drastic changes in the system need to be made, including the elimination of defined benefit schemes (to be replaced by defined contribution). But all the public unions will NEVER allow that -- watch the RV video on the California state pension. They will always push for more salary raises and pension benefits until the taxpayer literally can't pay anymore.
  • WS
    William S.
    26 February 2020 @ 17:45
    Not on point but the product shift demands a response How many purchased a product prior to today and are feeling unfairly treated by the 5/wk video limit that didn't exist until today? How many feel they should be grandfathered until their subscription runs out and then make the decision to continue at the lower (actually increased by 50+) or accept the "upsell" at 3x the price??
    • Sp
      Scott p.
      1 March 2020 @ 01:49
      Just paid my 3 year plus subscription but did feel that I should have bee grandfathered until my subscription ran out in April. Real vision is worth the money but I feel that the product was reduced after I already paid for it.
  • TK
    Tom K.
    21 February 2020 @ 08:49
    Really enjoy this documentary-style format, would be great to see more of this!
    • KM
      Kevin M.
      25 February 2020 @ 17:56
      Yes, this format used to be Grant’s bread and butter, but sadly he appears to have disengaged.
  • NA
    N A.
    25 February 2020 @ 05:06
    This is a bit amateurish. The pensions could cut costs and make better investments (mutually exclusive over a full market cycle IMO btw) and still they will fall short of their 6-8% targets. Why? Because interest rates are going to ZERO and the expected returns on all major asset classes are following suit. It's not possible for the whole system to make more than this. Adjust your expectations. Unless you believe in MMT bailout (also likely, but what have we learnt from government promises? Exactly).
  • AA
    Aaron A.
    25 February 2020 @ 01:03
    Takeaway....never trust a promise given by a government entity.
  • lc
    lynn c.
    24 February 2020 @ 20:33
    Boomer socialism. Keep blowing bubbles, keep demanding to be bailed out of the bust, keep bitching about other forms of socialism.
    • RV
      Ryan V.
      24 February 2020 @ 22:28
      It sounds like people literally stole this money. I’m all for laying hate where it is due, I don’t think this is an example.
  • JE
    J E.
    24 February 2020 @ 16:46
    I think the people shafted need to get WAY more angry. They seem resigned in a way. That’s not going to win this battle.
  • NO
    Neil O.
    24 February 2020 @ 09:39
    The idea of retirement (long, prosperous and leisurely old age) is very recent, around 60 or so years old. It is an idea that only works with enormous long term savings throughout a career, and very few are willing to do that. Without that, the result must be a longer working life and shorter retirement. We dress it up with complex terminology, but it is simple maths.
  • GB
    Glenis B.
    21 February 2020 @ 23:13
    Enjoyed this format @realvision. I'm in New Zealand. We have a government funded pension plan, which I think is quite generous at ~ $420pw for a single and $650 pw for a couple. However, it's really expensive to live here so particularly single people, often widows, struggle to live on this amount. Fortunately, most people, but not all, are mortgage free homeowners. We have an increasing number of homeless retired, shameful that our elderly are living in cars and unheated garages. We also have a baby boomer crisis and sooner or later the retirement age will increase from 65. In 2007 the government bought in a self funded pension (superannuation) scheme and employers contribute a portion as well. This is something we should have had 30-40 years ago. The reality is that the current working generations will be taxed to pay for current pensions while saving for their own. I'm a boomer, and I think that is so unfair.
    • PT
      Pavel T.
      23 February 2020 @ 23:02
      You forgot to mention that working population will also have to pay back their mortgages 10 times the average income. Hello from Auckland :)
  • FG
    Flavio G.
    21 February 2020 @ 08:00
    Always conduct your life as if the pension system would collapse. That's been my modus operandi for the last +20 years and that is why I have underspent when compared to my peers. People don't seem to understand the value of postponing consumption. I don't want any privileged retirees who have lavishly spent during their younger years to take money from me via increased taxation in order to finance their strolling into the sunset. This is a generational fight that the young deserve to win.
    • CJ
      Charles J.
      21 February 2020 @ 14:32
      I'm sympathetic to what you're saying, but I think it's painting with a broad brush. I think of my in-laws who have lived essentially their entire lives in a small town in Alabama. A teacher and a Vietnam Vet / worked his entire career at the Army Depot. These people aren't big spenders and their kids are all hardworking productive members of society. My wife is one of the more frugal people I know because that's how she grew up. They do have savings, but a chunk of that was lost when they got in and out of the market at the exact wrong time in the last cycle. Not to mention the fact that their banker had shoved them into a market fund this cycle with stupid fees, but they don't know anything about the market so they didn't know any better. When I talked to my father in law about the pension problems, he was glad that they were on a government pension so they wouldn't have anything to worry about. So now, they're living in a dying small Alabama town, relying on a government pension and their savings which would probably be much higher if they were more financially savvy. It's so easy to look at the extremes and say the whole group got what they deserved, but I'd imagine far more are like my in-laws than those that are living high off the hog expecting the world to take care of them. Fortunately for them, they have 3 kids who are responsible successful young people that when push comes to shove will be there for them, but not everyone is so lucky.
    • CJ
      Charles J.
      21 February 2020 @ 14:43
      One more thing... and this isn't a direct response to you but one of the other posts, but I wanted the response to be near my other post for context. The post said that these people have benefited from the financialization through their home equity. That's definitely true for parts of the country, but come to small town Alabama and tell me where housing prices are benefiting from low interest rates. Trust me, they're not.
    • TE
      Thomas E.
      21 February 2020 @ 16:39
      Agree. It would be wise for Gen X, Millennials, Gen Z, and future generations not to rely on Social Security. We talking with my financial adviser I always tell him NOT to include Social Security. If I get some of it great but not planning on it. Should be the same for anyone in a Pension. Need to provide for yourself.
    • NI
      Nate I.
      22 February 2020 @ 22:26
      I'm exactly the same way. A prodigious saver opposed to taxes. At the same time, I know we're going to pay one way or the other. Either the economy goes completely to hell with all of these folks living under a bridge, many committing crimes to make ends meet, or we bail them out. What I want more than anything is some serious strings attached to the bailouts to prevent the future moral hazard.
  • SR
    Steve R.
    22 February 2020 @ 13:36
    My wife is a retired teacher, so I have some understanding of the pension concerns. However, I believe that the Rhode Island teachers likely supported every government spending proposal. Didn’t they know that the money would come from taxpayers or their pensions? Or maybe both? Do they still support “progressive” policies?
    • NI
      Nate I.
      22 February 2020 @ 22:20
      Careful not to conflate the teachers with their union. When I worked for the government, the union policies/positions were usually exactly opposite to mine. Keep in mind that unions can only make more money when they have more members. That means the unions support proponents of big government (typically Democrats but not always). It's the unions that need to be sued for acting in their own best interest versus the best interest of their members. Even a big government guy like FDR of "new deal" fame was opposed to government employee unions. They really need to be legislated out of existence. There should be no public employee unions - period. Even FDR would agree.
  • KC
    Kirk C.
    22 February 2020 @ 19:44
    Those of us that had to save for our retirement alone, without employer plans, have a hard time feeling sorry for those that did not save outside of their employer plans. First, no public employee pension (single or married couple) should exceed the average family income. Second, look at all public employee plans within the state and determine which public employee plans are over-funded based on the average family income rule. That should solve the problem and make politicians think because it would be their plans funding the under-funded plans.
  • CP
    Carl P.
    22 February 2020 @ 12:27
    Great series! Pension management and transparency seem like ideal use cases for some sort of decentralized public data layer. Maybe someday someone will develop a network or something like a distributed public ledger that can handle the security and certainty required for suck a task. Perhaps they could also create a platform for some sort of autonomous self implementing contracts on this public ledger to monitor management and release/allocate capital based on performance and necessity. I suppose you would also require some sort of oracle solution to integrate and confirm the legitimacy all of this data. Oh well, maybe we’ll have something like this someday... ;)
  • RM
    Robert M.
    22 February 2020 @ 01:22
    Really well done piece. Can see that being turned into a documentary for Netflix. While we listened to pension managers talk this week about the shortfalls in the system, hearing from those getting impacted helps to reflect on their personal challenges as well as the drag on the US economy for this pension mismanagement.
  • PV
    Peter V.
    21 February 2020 @ 14:38
    At least Americans get to live in the greatest country on earth ;)
    • SA
      Sebastian A.
      21 February 2020 @ 22:04
  • GE
    Glenn E.
    21 February 2020 @ 13:59
    Is it possible there is a break away economy. Money being redired out of the economy and going some where. What is left is most of the people setting on debt.
  • CD
    Colin D.
    21 February 2020 @ 11:39
    The defined benefit promises made to the boomer generation have been rendered unaffordable due to economic and demographic changes over the years. If they seek to enforce them it is their own children and/or grandchildren that will pay the cost one way or another. Malinvestment by schemes, investment management fees and so on are marginal factors. The greatest harm has been done in the last 12 years by central banks' efforts to nail interest rates to the floor. This has massively increased the liabilities for those presiding over defined benefit promises and killed annuity buying power for those with defined contribution funds seeking a secure and stable income in retirement. My view is central bank intervention went too far and has continued for too long. However for balance I would also observe many of those suffering in terms of a hit to their pension income might just have seen their home equity and/or personal investment portfolios preserved or more likely increased by the same central bank largesse that has harmed their pensions!