I respectfully disagree. It's not a problem of investing too high a portion into equities, but not enough. Certainly not enough to keep up with the impossible demand of high pension payout for decades in retirement.
The PBGC is to pensions what the FDIC is to banks. Basically pensions pay a kind of insurance premiums to the PBGC agency, to be bailed out later if needed. The problem is, one of the requirements of the PBGC it to have too high a portion of the portfolio in somewhat safe funds like bonds, treasuries, and money markets. Thus it limits growth overall. If the pension managers don't have a high portion in safe funds, the PBGC raises the premiums. Thus, PBGC disincentivises pensions from growing well.
In my financial Sunday school class for years I've suggested a retirement portfolio that's about 70% in various equity funds (including a high-yield bond fund)/ 30% in various bound funds (including some treasury funds and money market). With a 4% annual withdrawal the portfolio gains enough to keep up with both the withdrawal and inflation (well, until Brandon hyperinflation maybe). During stock downturns (in which you don't want to pull your 4% withdrawal from a fund that's down), you have not only 1/4th of your funds in usually safe funds to help you (30% safe funds can handle 7 years of a stock downturn at 4% withdrawals), but also many equity funds to choose from (if spread out among 30 or more asset classes, there's always a few that are up even if most are down). That's me trying to keep up with inflation.
Pension managers have the same kind of problem. Even if they don't have to keep up with inflation (for the most part the pension payouts don't increase enough to keep up with inflation, if they increase at all), they do have to keep up with an increasing number of retirees demanding their pension checks beginning. Their PBGC insurance plan tells them not to be aggressive enough in investments to keep up with this huge demand.
The problem with the PBGC is that the premiums are not risk based.
I think you’re out of your mind recommending to retired people that sort of high risk mix more suited for young investors.
When everything crashes like now they can end up screwed.
The trick to retired,ent is being able to live strictly off cash DIVIDENDS and never have to sell a thing especially like now when the markets have all tanked.
My close ended income funds pay even more in dividends during volatility and provide even more cash dividends to get me through even the worst periods of inflation.
Preservation of original investment is a must for me and it’s worked well so far
In fact I can live on less than half of my monthly dividends and reinvest the other half at my pleasure when the market heads back up.
Never have to sell a single share of *anything* and I’m not even old enough to get SS yet