Yesterday, Your Survival Guy pointed out how right he was back in 2018. At the time, pension funds were getting fat at the trough of commercial real estate. I didn’t like the move and said so.
Then, out of nowhere, Covid crashed upon the shores, and the work-from-home revolution began. That wasn’t predictable, but you see what’s happening to big blue blob cities. I’m not patting myself on the back, but when you’re right, it’s not bragging. This leads us to how pension fund managers fail: They fail as a group.
Pensions are run by committees, typically with a “head” manager who’s basically a consensus builder. Why the consensus? Because it’s easier to fail as a group than as an individual. Pension committees are the epitome of groupthink. And it’s all about job security. Theirs, not yours.
The same can be said about mutual funds and ETFs measuring themselves against a benchmark. They don’t want to stick their neck out and be wrong. If they fail alongside their benchmark, can you blame them? “The market was terrible,” they say. But the kicker is, most investors, not you, I hope, invest based on past performance which says nothing about the future.
Retired police officers and teachers are stuck in this doom loop, relying upon a committee’s judgment and the underfunding and overspending by politicians.
Once you understand the politics behind the money, you realize how messy it truly is.
Action Line: Unfortunately, those in defined benefit plans or pensions are stuck. But if you’re in a defined contribution plan: a 401(k), SEP IRA, or others, then you may have the option to self-direct and roll it over to an IRA. If you need to discuss your options, I’m here.
Originally posted on Your Survival Guy.
