401k Style Accounts Are Being Favored Over Pensions

by | Jul 13, 2011 | Asset Management

Weekly Commentary for January 25, 2011

The entire “financial plan” for states and other municipalities rides on their power to tax, and the ability of these municipalities to raise money (borrow) by issuing bonds. This is where a financial advisor might come in handy.
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These tax free municipal bonds have become known as some of the safest investments around.  After all, states — and other municipalities — can’t fail or go bankrupt.

Or…can they?

And, under bankruptcy protection, obligations (bonds are obligations, right?) can be dismissed, onerous contracts (like union contracts?) can be ripped up, future payments (like pension obligations?) can be be deferred or restructured.
Blasphemy?! Well, no.

Want to know why people in Greece, France — and even London — were seen rioting at different points in 2010?  Pensions were one of the topics “on the table.” We may have been given a peek at our own future here.  Not sure.

If you are relying on a blog post for specific investment advice, you are making a huge mistake. Please speak with an investment adviser before making ANY investment decisions.

If you do not have an investment adviser, we encourage you to contact Mullooly Asset Management at 732-223-9000, or through our website.

Under no circumstances should the content discussed on this post be considered specific investment advice.

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As many of you know, I manage the investments for many folks who are participants in Deferred Compensation plans offered through municipalities.  Someday the guaranteed pension may not be so straightforward.

Who knows what will happen?  Many are speculating about what the future might bring.  But it is just that: speculation.

When NYC was on the brink (and were technically already in default in 1975), suddenly the Municipal Assistance Corp (MAC)  was created.  And sold ten billion dollars worth of bonds to save NYC.

But now that little “extra” plan, the deferred compensation account, suddenly takes on WAY more importance.  More and more we hear the drumbeats of 401k-style accounts to replace pensions everywhere.

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