The Most Important Concepts in Finance
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The Most Important Concepts in Finance

Edited by Benton E. Gup

Anyone trying to understand finance has to contend with the evolving and dynamic nature of the topic. Changes in economic conditions, regulations, technology, competition, globalization, and other factors regularly impact the development of the field, but certain essential concepts remain key to a good understanding. This book provides insights about the most important concepts in finance.
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Chapter 13: The state of state pension plans: challenges ahead

James R. Barth, John S. Jahera Jr and Sunghoon Joo


Public pension plans in the United States are coming under increased scrutiny as they show signs of serious financial stress and underfunding that could jeopardize their viability. Some states have recently adopted changes to their traditional defined benefit plans; others persist in the debate over reform proposals, even in the face of significant underfunding. This chapter will address the status of state public pension plans, focusing on funding shortfalls and the reasons for this growing problem. We conclude with a discussion of possible remedies to the ongoing funding crisis in many states. OVERVIEW Life expectancy in the United States, as elsewhere, has risen significantly during the past century. An American born in 1900 might have lived on average to age 47, while today the comparable figure is 79. Clearly, nearly doubling one’s life span is a good thing; individuals now have more time beyond their working years to enjoy a more relaxed lifestyle. Of course, they still need income to make these additional retirement years secure and enjoyable, and for most, this “retirement egg” consists of the savings they accumulated while working, Social Security benefits, and any retirement benefits they may receive from their employers when they stopped working.

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