Recently the New York Times highlighted the troubles of the New York City pension system. The pool of money held to pay future benefits is at least $100 billion short of where it needs to be.
Experts debate the exact amount but it’s clear that there’s not enough money to cover obligations. The pension troubles consuming the budget, rising from 2 percent of total spending to 11 percent in a decade.
What’s also clear is that this huge institutional investor is making the same mistakes as ordinary, small investors: paying too little attention to something that cries out for focus, failing to properly allocate assets and falling prey to the siren song of unrealistically high projected returns in alluring investments.
It’s a shame that boring old stocks and bonds don’t have the pizzazz of alternative investments — hedge funds, private equity, venture capital.
The Times mentions that the pension system’s investment return goal was unrealistically high at 8 percent annually. Actual returns were two percent a year.
Individuals make the same mistakes and this doesn’t have to be; a little realism and some good planning go a long way toward achieving a successful and comfortable retirement. We can help.