(RightWing.org) – Many workers in both the public and private sectors have a pension plan they are counting on to give them a healthy, monthly financial boost as they head towards retirement. However, these programs are supplied by pension funds on Wall Street. The 15-year average cash holding of a public pension is hovering around 2.45%, while corporate pensions are about 2.07%. But, the current cash holding for pensions is much lower, which is raising a red flag for many economists.
According to the Wall Street Journal, the cash holdings for state and local government pension funds as of June 30 is 1.9%, with corporate pensions at 1.7%. This is hovering just above the 13-year low of 2021.
Cash holdings hit 1.9% of assets at state and local government pension funds and 1.7% of assets at corporate pension funds as of June 30 https://t.co/CZzzyemTp7
— The Wall Street Journal (@WSJ) December 27, 2022
With the potential for a recession still on the horizon, The Heritage Foundation research fellow for regional economics, EJ Antoni, told the Daily Caller News Foundation this could lead to some messiness in the future. According to him, the pension funds are “making promises that could never be paid,” and someone “will be left without a seat” eventually.
If a pension fund has a lot of cash on hand, it may experience lower returns. However, if it does not have enough cash to make payments, it may be forced to sell assets at low prices, reducing the fund’s overall ability to bring in future returns. Moving into 2023, funds need to find what they believe is the right balance of these figures in order to make payments without impacting their long-term fund goals.
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