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Pension Pain Begins

Financial Armageddon quotes a Wall Street Journal piece on the pension timebomb. Municipal Pension Time Bomb Set to Go Off

The pain is about to start in Wisconsin. The state has an unusual policy of adjusting the amount of benefits paid based on the pension fund’s performance. Now, for the first time in 25 years, the majority of retirees will receive a benefit reduction. This month, Wisconsin officials said that beginning in May nearly 150,000 retirees will face at least a 2.1% decrease in benefits, after the pension fund had a 26% negative return in 2008.

About 35,000 of retirees who held a portion of their retirement savings in an optional fund that invests entirely in stocks will be hit harder. Depending on how much of their savings they earmarked for the all-stock fund, their overall retirement income could be cut by up to 40%, according to a spokeswoman for the State of Wisconsin Investment Board.

Emphasis added. As much as a 40% reduction for existing Wisconsin pensioners? Wow.

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