Here is the problem in the current pension fund environment. Many pension funds make long-term assumptions, typically optimistic. The following graph show an expected 8.75% annual return on investment on $1,000:
![CropperCapture[215]](http://www.servias.org/wp-content/uploads/2013/10/CropperCapture215.png "CropperCapture[215]")
For each $1,000 invested, in 30 years you would end up with $13,800 at 8.75% interest rate. What happens when the interest rate drops to 3% for an extended period of time?
![CropperCapture[216]](http://www.servias.org/wp-content/uploads/2013/10/CropperCapture216.png "CropperCapture[216]")
You end up with $10,000 less. This is what the shortfall in the pension funds is all about. They are in denial and continue to expect improved performance. With short-term money at .7%, the deficit to be made up intensifies.
The Federal Reserve continues to suppress rates and print more money. Life Insurance companies are using the same assumptions as pension funds. At some point there will be a “Great Leveling”. Your whole life insurance may go into the deep red, your pension fund may be grossly underfunded, and your saving dollars’ purchasing power is disintegrating. This is why I personally view having at least 10-20% of savings in physical assets. However, you should contact your investment advisor to determine your optimum investment position.