Study reveals the U.S. Pension System is short by $1 Trillion

By MoneyTimes

Jul 16, 2015 11:38 AM EDT

The states of Illinois, Kentucky and Connecticut, according to a study by Pew Charitable Trust, have been found underfunded by at least $1 trillion. 

In a report by CNN Money, pension funds were seen to suffer from two major reasons. First, the funds invested in stocks were not able to cope from the Great Depression up to now. Second, the pension programs that promise retirees a calculated amount of benefits have required contributions that some states fail to maintain. 

The report cites New Jersey as being able to make only 47% of its 2013 required annual contribution while two years prior to that were only 39% and 32% respectively.  New Jersey is currently at a $51 billion shortfall while Illinois is currently short by more than $100 billion.  These numbers are quite bothering yet previous estimates say it is even worse.

Joshua Rauh, a finance expert from Stanford University estimates that the current state level pension debt is at $4 trillion. Republican governor Bruce Rauner of Illinois is currently working on balancing the state budget with high priority in pension liabilities. Rauner is working in cooperation with the Democratic legislature to achieve this goal.  

A report by Mercatus Center in Georgia implies that Illinois and New Jersey may be having some similarities in the Greece's economy before it slipped down to the deep hole it is in right now.  While the entire pension system in the US could be in jeopardy, hope still gleams bright in some states.

The same Pew Charitable Trusts report showed South Dakota to have a 99.9% fully-funded pension system for 2013 while Oregon improved its rank from 6th in 2012 to 4th in 2013 in terms of its ability to pay its pension liabilities.

The pension system that contributed to the crippling of Greece's economy could be a hidden tragedy waiting to happen in other parts of the world. In this case, US states are showing warning signs of an economic downfall that everyone should keep an eye for. 

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