Grand Rapids, MI -- (SBWire) -- 02/02/2011 -- Back in October, financial advisor Dennis Tubbergen used his online blog and his monthly Moving Markets™ newsletter to comment on the trouble Iceland was having with its pension funds. The Wall Street Journal ran an article on January 17, 2011 about many of the states and municipalities in the U.S. may have cause to worry about pensions.
Tubbergen, the CEO of USA Wealth Management LLC, a federally registered investment advisory company, frequently gives his opinion on the economy in his online blog as well as his monthly newsletters for financial advisors and other followers. He notes that the WSJ article stated the prices of municipal bonds has been falling, “driving yields on long-term bonds to the highest points in more than 18 months, as investors worried about the impact of the end of a federally subsidized borrowing program.”
“The price of bonds is falling,” explains Tubbergen. “This means yields are rising, including the yields on municipal bonds. That could mean investors are worried about the ability of some states and municipalities to pay back their debt given the current economic climate.”
Tubbergen refers to a January 16, 2011 article posted on The Militant.com, which concluded U.S. state pension funds are underfunded by an astounding $1 trillion or more. The article goes on to claim that at least 39 states have either cut benefits, raised the age at which employees can retire, or increased the amount of pension deductions from current employee’s paychecks.
“One reason that the bond market is pessimistic about the future of municipal bonds is that pension funds are, as shown here, woefully underfunded,” adds Tubbergen.
The article in The Militant goes on to explain that some pension funds use ”creative accounting techniques” to give the appearance of meeting funding requirements of their pension funds, noting some municipalities in New York can defer pension fund payments by “borrowing against estimated future gains in the funds’ financial investments.”
“The ‘creative accounting techniques’ mentioned in the article above may now be catching up to the states, given what is happening in the municipal bond market,” concludes Tubbergen. “And this may just be the beginning.”
Dennis Tubbergen has been in the financial industry for over 25 years and has his corporate offices in the USA Wealth Management building in downtown Grand Rapids, Michigan. Tubbergen is CEO of USA Wealth Management, LLC and has an online blog that can be viewed at http;//www.dennistubbergen.com. His weekly talk show The Everything Financial Radio Show is simulcast on two Michigan metro stations and also airs to over 600,000 financial advisors, with recent podcasts available at http://www.everythingfinancialradio.com.
The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee. Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.
Financial Advisor Sees Possible Pension Trouble for Many States
Financial advisor Dennis Tubbergen takes a look at what may be in store for the states with underfunded pensions.