Many state and local governments rely on these 'defined benefit' pension pension plans, as do a handful of large corporations.
We talk a lot of about how Social Security is rapidly running out of money.
But according to Credit-rating agency Moody's, state, federal and local government pension plans are also $7 trillion short in funding.
Pension fund managers invest in various assets– stocks, bonds, real estate, etc. with the hope of generating safe investment returns.
And over the last 10 years CalPERS' investment return has averaged just 5.1%. They need 7% to stay afloat.
SAFELY earning 7% is a difficult task today: government bonds in the US yield around 2%. Even junk bonds, which are ultra-risky, yield just 5%.
And this matters… because they're responsible for YOUR retirement.
I write a lot about the need to have a good 'Plan B'… a backup plan in case the primary option doesn't work out.
Warren Buffett compares a royalty to owning a tollbooth: after you make an initial investment to build the toll road, the upkeep is minimal.
Another hedge fund, Shamrock Capital, raised $250 million last year to buy the rights to music, movies, TV shows and even video games.