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The Trouble with Pensions: Toward an Alternative Public Policy to Support Retirement

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  • Yeva Nersisyan
  • L. Randall Wray

Abstract

Pension funds have taken a big hit during the current financial crisis, with losses in the trillions of dollars. In addition, both private and public pensions are experiencing significant funding shortfalls, as is the government-run Pension Benefit Guaranty Corporation, which insures the defined-benefit pension plans of private American companies. Yeva Nersisyan and Senior Scholar L. Randall Wray argue that the employment-based pension system is highly problematic, since the strategy for managing pension funds leads to excessive cost and risk in an effort to achieve above-average returns. The average fund manager, however, will only achieve the risk-free return. The authors therefore advocate expanding Social Security and encouraging private and public pensions to invest only in safe (risk-free) Treasury bonds--which, on average, will beat the net returns on risky assets.

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Bibliographic Info

Paper provided by Levy Economics Institute, The in its series Economics Public Policy Brief Archive with number ppb_109.

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Date of creation: Jan 2010
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Handle: RePEc:lev:levppb:ppb_109

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  1. L. Randall Wray, 2008. "The Commodities Market Bubble: Money Manager Capitalism and the Financialization of Commodities," Economics Public Policy Brief Archive ppb_96, Levy Economics Institute, The.
  2. Dimitri B. Papadimitriou & L. Randall Wray, 2000. "Minsky's Analysis of Financial Capitalism," Macroeconomics 0004022, EconWPA.
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Cited by:
  1. Marshall Auerback & L. Randall Wray, 2010. "Toward True Health Care Reform: More Care, Less Insurance," Economics Public Policy Brief Archive ppb_110, Levy Economics Institute, The.
  2. L. Randall Wray, 2011. "Minsky's Money Manager Capitalism and the Global Financial Crisis," Economics Working Paper Archive wp_661, Levy Economics Institute, The.

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