“We are on the precipice of the greatest retirement crisis in the history of the world. And that makes perfect sense because, first of all, we have the largest elderly population in the history of the world.
Just focusing on the United States: our elderly are woefully unprepared to retire. And in the decades to come we will witness millions of elderly American's, Baby Boomers and others, slipping into poverty. 'Too frail to work, too poor to retire' will become the new normal for many elderly Americans.”
So warns pension fraud whistleblower Ted Siedle.
Siedle's firm, Benchmark Financial Services, Inc. has pioneered over $1 trillion in forensic investigations of the money management industry. He's nationally recognized as an authority on pensions and investment management matters, having testified before the Senate Banking Committee regarding fund scandals and is an expert in various Madoff-related and other litigations.
In 2017, he secured the largest SEC whistleblower award in history of $48 million, and in 2018, the largest CFTC award in history at $30 million.
Siedel rings a loud warning bell regarding the solvency of today's public pension system. Specifically, his investigations show that most of them:
- Are much too under-funded to meet their future payout obligations (e.g., Kentucky's state pension plan is only 12% funded)
- Are experiencing annual returns far below the required 7% average the plans assume in their forecasts
- Have oversight boards making portfolio allocation decisions that are staffed by individuals with zero experience managing financial securities (e.g., policemen, kindergarten teachers)
- Have little transparency. Many are rarely audited. And many have moved their capital off-shore without accounting for where it's been moved to.
- Are heavily influenced by politics when making portfolio allocations. Pet projects, such as sports stadiums, get funded to disastrous results while making local politically-connected 'friends of the pension board' rich
- Are paying much higher fees to Wall Street than they used to, whose advisors are putting them into riskier and poorer-performing vehicles (e.g. hedge funds) in a desperate reach for yield
Siedel's Top 10 Reasons Why Stealing From State And Local Public Pensions Is The Perfect Crime is reading certain to give nightmares to anyone depending on a public pension, or worried about being forced to bail out failed funds by paying higher taxes in the future:
I think there will be bailouts. The alternative is chaos, disaster, Armageddon. I mean, it's like when people say we should cut Social Security benefits. Well, the majority of people that get Social Security live on nothing but Social Security. If you cut Social Security benefits people will die. People will get sick. People will not be able to get healthcare. Elderly people will be thrown out of their homes, their apartments, whateverWall Street will say “We've got a solution!” They'll offer pension obligation bonds, whatever. The solution Wall Street offers always is: Pay us more fees. Pay us to underwrite bonds. There will be many “solutions” offered. Taxing property owners is always popular as well.
Click the play button below to listen to Chris' interview with Ted Siedle (58m:11s).