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What Exactly is Unfunded Pension Liability?

HeroicInvesting.comThe term “unfunded pension liability” has been getting a lot of press lately, from both politicians and union leaders, but exactly what does it mean to the average first responder and will it have an effect on your future? To take the last question first, there’s a very good chance it will have a huge impact on your retirement plans unless something changes the road we’re on. Like Social Security, pension plans appear to be on a collision course with insolvency.

A Definition
What are we even talking about, this unfunded pension liability? To be brief, pension liability is the money a pension fund has in the bank to pay retirees. Since everyone doesn’t retire at once, liabilities are usually calculated using a 30 year window and return on investment rate of 8%. The amount of deficit in the fund to meet these defined obligations is called an unfunded pension liability.

Why You Should Care
There are a few reasons the growing level of unfunded pension liability around the country should make you nervous. In the first place, even if everything stayed exactly the same as it is now, there’s not enough money in the pot to pay everyone everything they were promised. Additionally, politicians are growing nervous about the increasing budget strain caused by meeting these obligations. They’d like to change the game if they could, which could take a variety of different forms but the end result is fewer benefits for you.

Like What You Hear?
We hope not, but the bottom line is you can continue to place your faith in a system that shows all the signs of going belly up, or you can take matters into your own hands and create an independent source of income for your retirement, one that will likely leave you in a much better financial position than any retirement plan ever dreamed of.

Now, all you need is to know how to do it. If you haven’t listened to Jason Hartman’s interview of cop-turned-real-estate-mogul yet, click HERE to do so.

The Heroic Investing Team







Flickr / Tom Chambers