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Broken Promises: Pensions All Over America
Michael Snyder discusses the growing need for pension cuts across the states and cities. Any so-called solutions (like raising taxes) will inflict pain in the other places, while cycling right back to the same place anyway. Another vicious cycle: Of the 10,000 baby boomers headed for retirement - how many won't be able to? How's this going to effect the lack of jobs for younger people? A stock market crash would be disastrous, so the "printing money" method (with consequent devaluation of savings) seems like a way to slow our economic demise, but I can't envision any way out of this. Can you? ~ Ilene
Broken Promises: Pensions All Over America Are Being Savagely Cut Or Are Vanishing Completely
Courtesy of Michael Snyder of Economic Collapse
How would you feel if you worked for a state or local government for 20 or 30 years only to have your pension slashed dramatically or taken away entirely? Well, this exact scenario is playing out from coast to coast and in the years ahead millions of elderly Americans are going to be affected by broken promises and vanishing pensions.
In the old days, things were much different. You would get hired by a big company or a government institution and you knew that the retirement benefits that they were promising you would be there when you retired in a few decades. Unfortunately, we have now arrived at a time when government institutions and big companies have promised far more than they are able to deliver, and "pension reform" has become one of the hot button issues all over the nation.
Many Americans that have been basing their financial futures on their pensions are waking up one day and finding that their pensions are either gone or have been cut back dramatically. According to Northwestern University Professor John Rauh, the latest estimate of the total amount of unfunded pension and healthcare obligations for state and local governments across the United States is 4.4 trillion dollars. America is continually becoming a poorer nation and all of that money is simply not going to magically materialize somehow. So where is that 4.4 trillion dollars going to come from? Well, either pension benefits are going to have to be cut a lot more all over America or taxes will need to be raised dramatically. Either way, we are all going to feel the pain of these broken promises.
There simply is not enough money out there to keep all of the pension commitments that have been made. Something has got to give. In the end, millions of elderly Americans will likely be plunged into poverty as pensions disappear.
Some local governments around the nation are already declaring bankruptcy and are either eliminating pensions or are cutting them very deeply. Just check out what just happened in Central Falls, Rhode Island....
For years, city officials promised robust union contracts and pensions without raising revenue to pay for them. Last August, the math caught up with them. Central Falls was broke, its pension fund short $46 million. It declared bankruptcy.
.
"My daughters grew up here, went to school here. It's all gone," said Mike Geoffroy, a retired firefighter.
.
He said he could not make the payments on his house after his pension was cut by $1,100 a month.
When will the math catch up with the city where you are living?
For years and years most of our state and local politicians have been ignoring this problem. But eventually a day comes when you simply cannot ignore it any longer.
Check out what Pensacola Mayor Ashton Hayward said about the situation in his city recently....
"When our annual pension liability is more than our yearly property tax revenues, we have to do something"
Keep in mind that taxpayers don't get any new services for money spent on pensions. It is money that goes straight into the pockets of retired workers. State and local governments are desperately trying to pay retired workers what they are owed and fund ongoing government functions at the same time, but many have reached the breaking point.
All over the country, state and local governments are going broke. The following is from a recent article by Duff McDonald....
Alabama's Jefferson County has actually gone bankrupt. Stockton, California is all but ready to do the same. And all you have to do is look to Detroit—or any of the nearby auto towns named after a Buick model of one sort or another—and you see fiscal crisis playing out right now. Look in your own backyard—or at the potholes on your neighborhood roads—and you will likely find the same.
Things are so bad in Stockton, California that they are actually skipping debt payments....
The city of 290,000 that rode the wave of the housing boom in the late 1990s and early 2000s now finds itself littered with foreclosed homes, saddled with pension, health care and other obligations it can't afford, and unable to pay its bills.
The City Council voted last month to suspend $2 million in bond payments and begin negotiations with bond holders, creditors and unions.
And did you notice what is being blamed for the financial problems in Stockton?
Pension and healthcare benefits.
Sadly, we are seeing pension nightmares erupt all over the nation right now.
For example, check out what is happening to the Public School Employees' Retirement System and State Employees' Retirement System in Pennsylvania....
PSERS had an accrued unfunded liability of nearly $26.5 billion, the amount of money the fund is short to cover existing retirement benefits. That hole is expected to grow to $43 billion by 2019. SERS is $12.5 billion in the red, and that shortfall is expected to climb to nearly $18 billion by 2018. Unless the stock market makes giant sustained gains, taxpayers will have to refill those funds.
That doesn't sound good at all.
In California, the Orange County Employees Retirement System is estimated to have a 10 billion dollar unfunded pension liability.
How in the world can a single county be facing a 10 billion dollar hole?
This is madness.
The state of Illinois is facing an unfunded pension liability of more than 77 billion dollars. Considering the fact that the state of Illinois is flat broke and on the verge of default, it is inevitable that a lot of those pension obligations will never be paid.
In fact, there are going to be a whole lot of broken promises all over the country.
Pension consultant Girard Miller told California's Little Hoover Commission that state and local government bodies in the state of California have $325 billionin combined unfunded pension liabilities.
That comes to about $22,000 for every single working adult in the state of California.
So where is all of that money going to come from?
But at least most state and local government employees are still covered by pension plans, even if they are failing.
In the private sector, pension plans are vanishing at lightning speed.
According to the Boston College Center for Retirement Research, the percentage of workers in America covered by a traditional pension plan fell from 62 percent in 1983 to 17 percent in 2007.
That isn't just a trend.
That is a tidal wave.
And many of the private pension plans that still exist are massively underfunded. For example, Verizon's pension plan is underfunded by 3.4 billion dollars.
So what should Americans do in light of all this?
Well, the number one thing to realize is that the pension plan you have been counting on could disappear at any time.
We live in an economic environment that is extremely unstable, and about the only thing you can count on in this environment is rapid and dramatic change.
Do not plan your financial future around a pension plan. If you do, you are likely to be bitterly disappointed.
Americans that plan to retire in the coming years should do their best to try to fund their own retirements.
Unfortunately, most Americans are not putting away much of anything for retirement. As I have written about previously, one study found that American workers are $6.6 trillion short of what they need to retire comfortably.
Ouch.
Over the next 20 years approximately 10,000 Baby Boomers will be retiring every single day.
A lot of them are going to be blindsided by empty pension funds and broken promises.
We are facing a retirement crisis of unprecedented magnitude, and there is not much hope in sight.
And if there is a major stock market crash, things are going to be much, much worse.
Most pension funds and retirement plans are heavily invested in the stock market. If we were to see a major financial crisis like we saw back in 2008 it would be absolutely devastating. Millions of Americans could see their retirement plans wiped out in short order.
Once again, please do not place your faith in the system.
If you do, you are likely to end up holding a bag of broken promises.
A gigantic tsunami of unfunded pension obligations is coming. A lot of state and local governments are going to go broke. A lot of promises are going to be broken.
If you hope to retire any time soon, you better plan on being able to take care of yourself.
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NO PROBLEM.......(at least for the federal pensions) You'll get all the money you were promised - it just won't be worth as much.
Aw yes, the social security solution.
How many working class people actually have a pension? Seems like their cries for help might fall on deaf ears. Most of the modern professional world is responsible for saving and investing on their own, just like small business owners. Ask the average 30-something today and they probably don't even know what a pension is.
"Most of the modern professional world is responsible for saving and investing on their own, just like small business owners."
And out of a human population of 7+ billion how many might This be?
2/3 of the world's population lives on $3/day or less.
The "investing" and "retiring" paradigms are a fluke, occurring only during a very small era in all of human history, and for a very small number of people.
You just have to market the tax raises right so it doesn't fall on deaf ears.
First use the guilt trip: It's for the children and the ones with the most important jobs in the world...the teachers. It's only a penny. You can't pay a penny for the childrens schools?
Then bring out the scare tactics: We'll have to lay off the cops and firefighters. The response times of our first responder hero's will increase, double in some cases. Grammy will drop dead and your house will burn to the ground and your pets will be burnt to a crisp in the fire because the firefights didn't have the 20K chrome bumper with 1000 flashing lights on their fire truck to make it your house in time. Nevermind that they can shop in BassPro Shop for an hour straight while on shift.
There will only be 1 cop per 1000 people. Chaos will erupt in the streets. One cop per car makes them vulnerable and uncapable of defending themselves with their mace, taser, pistol and shotgun. Don't mind eight of them deciding to have lunch at In-N-Out at the same time. That place is safe though.
All the bridges are 20+ years old and on the verge of collapse. Didn't you see that one in MN crumble to the ground. You don't want to be buried alive by the nearest overpass do you?
The local nightly news will run the story tease for all the fucking retards watching The Bachelor or American Idiot. The sheeple eat the bullshit up everytime.
It's kind of a chicken-and-egg thing, but people seem to expect these things. I think that This is the real problem- people expecting what really isn't possible. Politicians then leverage this.
Also, there's a LOT of subliminal messaging going on (thanks to the legacy of the likes of Edward Bernays). On the surface of lots of things you'll see one thing, yet on the back-end you'll see other things. Reminds me of my battle against the construction of a govt-sponsored community center. Lots of "it's for the children" and so forth. The BIG money was made by the BIG (out of state) construction firm: and the majority of construction jobs (union) were from out of county, despite how the local pols pitched things as being great for "creating" work.
It's all human nature. Private or public, doesn't really matter. As long as you create/allow BIG you're going to have abuse (that's what Power is about).
The average 30 something can't even think about retirement. Underwater on the mortgage and screamin babies and increasing prices, at the store, at the pump. Hopium smoking so not lose their job if they still have one.
These pensions operate on a cash flow basis similar to governments. The shit wont hit the fan until there is more money going out than coming in. The unfunded liability is irrelevant. All of these pensions were structured with unrealistic rates of returns. The ZIRP has done its part in sucking them dry. Prime rate should always be at 3% base.
>Prime rate should always be at 3% base.
Cool. Since you know what the price of loanable funds should be fixed at, what about the prices of other economic goods, like potatoes or dentrifice?
Potatoes should cost $0.08 a pound, and dentrifice around $0.12.
At least, that's what they cost before the Fed got working on 'maintaining' the value of the dollar.
Thank the Chairsatan for ZIRP.
Well you can't give the money to Goldman Sachs and granny too. What happened to all the pension contributions sucked out of everyone's pay checks for the last 60 years?
Some of it went to bonuses based on the future value of transactions based on prior projections.
I think the simpler explanation is that it was stolen.
Diogenes, that money went to pay the pensions of the already retired. Also, pensions are heavily invested in MBS - and will be getting dimes on the dollar from the likes of GS, et al.
I don't think there should be pensions for the public sector unless they are employee funded (like mine was in the private sector).
Bad enough my tax dollar is wasted on increasing the government.
I suspect that most public sector employees would be willing to trade the future benefits of their pensions for current benefits in the form of salary. But beware, that means an immediate increase in taxes to support those rich salaries. The crime here is that many pension funds were undercapitalized to begin with, then, following the crash, lost money and had a hard time making those 7.5% gains the actuarials were assuming. I expect that federal pensions will be paid in full, even if they have to crash the dollar to do it. State and local pensions? Maybe 50 cents on the buck.
Steelhead - I was reviewing a chart of State pensions in 2010. My former home state of NH was 46% unfunded vs. Maine 14%. I moved to Maine in 2004 because the legislative and judicial system in NH is insane.
I remember thinking then if the state would use the banking system to liquidate properties. Well, the state of NH collapsed in August of 2011. I moved the business into Maine in December.
In January my Mom passed from cancer and I was busy that month. I picked up my mail early February where the Department of Labor sent a notice on January 3rd for a hearing on my disability lapsing for ONE employee. The fine was $100,100 with threat of lien of property. This was a blatant property grab attempt. They only unwound it with sending my personal bankruptcy notice to them and did not care about other evidence that my NH operations were closed.
Oh yeah, the police pensions were cut to .50 on the dollar. It makes the police worse because it really does become an "us or them" situation to those folks.
Jefferson and his quote about allowing the banking system to run government was correct about the American people finding themselves homeless on the continent our forefathers conquered.
Your story saddens me - all the more because I suspect it is all too common. It is blindingly obvious that the people need to drive a wedge between financiers and politicians. Poor Jefferson has to be face down in his grave.
Exactly; it was a recruiting tactic.
Governments gave generous pension benefits to public employees in lieu of higher pay since pensions didn't have to be paid immediately. Furthermore, the politicians who promoted this model knew they would be long gone when the funding problem came to a head.
Kind of like social security...
You got it - though SS was not a recruiting tactic - just a pot of money that suffered the fate of all pots of money held in government "trust."
@ joe blow, What are you do when they steal your employee funded pension? Co mingled funds, ect. You are in the same boat....we all are.
They tried (and FAILED) to rob my (HUGHES) pension fund twice.
First GM tried, then Raytheon tried.
The only thing that saved it was the Federal law that makes employee funded pensions exempt from being robbed.
A private sector employer can rob the pension fund if there is no employee contribution.
If first they do not succeed, they will try again. Use MF global as a buisiness model POOF!! your pension is gone! We are all in the same boat Amigo.
They gave up.
I retired and drew my entire pension and moved on.
MFG did not have anything to do with pensions, they were just thiefs.
Timmy the tax dodger will be raiding the Federal Retirement funds about Aug/Sep to keep from having to get Congress to raise the debt ceiling till after Nov 6.
But stealing your money is a business model, ask GS or any of the rest of them. Congrats on getting your dough and getting out. Hope you have a little garden and some chickens or someting to keep you amused in your spare time.
We were discussing pensions, but I guess you are just obsessed with business models that have nothing to do with pensions, except stealing funds.
My point exactly.
My father is planning on retiring next year, its all he ever talks about. I want to tell him not to because of what is going on with pensions, and the economy in general, but the MSM has him lured in.
But if he wont listen to me, what else can I do?
I would assume that is the case with many also, though.
think of it as a paid vacation till the check stops.
i tell people who are eligible to take the money now before its gone instead of "waiting till they are 65".
when its gone its back to work and being a burden for your kids, assuming that you were lucky enough to have some.
Good advice, that's what I did. The pension advisor told me to wait another 10 years and I'd get twice as much. I pointed out that assumed there would be any funds left to disburse in 10 years and/or the future money would have any real buying power and she laughed nervously. Remember, "life is short, eat dessert first". That also explains all the early (62 years) benefit requrests from SS which along with the payroll tax cut will accelerate the demise of that Ponzi scheme too. People know that in a Ponzi, those who get out first, end up better off. (Remember that all you stock market longs) And any debt based money system is certainly a Ponzi.
@ilene Maybe you should interview Meredith Whitney. She was harshly criticised after her appearance on CNBS discussing this topic.
I was born in the last 30 years.
WTF are these "pensions" everyone keeps talking about??!!?!?
A pension is a boardinghouse in France and other European countries, providing full or partial board at a fixed rate. Some are nicer than others.
It's also a type of ponzi scheme.
carousel bitchez
http://www.youtube.com/watch?v=mxD-5z_xHBU&feature=related
The Obamacare Final Solution...
- People------>biofuel
- Slave labor for the elites
- Slave labor for AAPL
- Forced passengers to martian settlements
Soylent Green....is made of.....people!
I know a guy who knows a guy who made a point to tell this very same thing to every cop he could at OWS.
Turned out more than a few had never thought about it before.
You can bet they're thinking about it now!
DEVALUATION, BITCHEZ!!!
I been telling co workers the same thing since the 2008 SHTF.Im doom and gloom.Some picked up on what is going on.Im prepared on a mental level,some will go bat shit for sure.Come into this world with nothing and leave with nothing.
According to the experts that will never be allowed to appear on the MSM, the radioactive discharge from Fukushima is already polluting the Pacific. Forget about eating sushi. Radiation following air currents have also significantly affected Alaska and the west coast areas of Canada and the US. Infant mortality rates have spiked. From the BP spill, Gulf shrimp and other marine life are found to contain toxic chemicals, and then there's contrails and flouridation, GMO and red slime at MacDonald's.
It may take a couple of generations, but the NWO will achieve a halving of the world's population, although a nuke war would achieve that in faster time.
Pick your poison folks and go long cancer treatment centers.
Not exactly sure what the four down votes are. Anyone ever heard of 'slow kill'? Oh normalcy bias right.
Links? Or else STFU.
you come here often?
don't believe the post, or search engine 'em yourself, should it interest you.
red slime at MacDonald's
I think that's PINK slime at McD's. the RED slime is in the Whitehouse.
If your interested in an analysis of the pension crisis at a local level check out this article. You can also see the website and get a sense of the corruption that dominates local politics and a possible way forward.
http://vermont.academia.edu/RobertSkiff/Papers/1296022/Reform_South_Burl...
What a tard. How dumb do you have to be to NOT know the answer to this question is CTRL-P? Raising taxes is impossible, as it only further depletes revenue as it impacts what little productive capacity remains. Cutting benefits directly? Well, that's nothing but a ticket OUT of DC, as there are no statists who desire a smaller state.
Greenspin said it himself long ago in a congressional hearing. "We can guarantee all US obligations. What we cannot guarantee, is their purchasing power."
It doesn't take a genius to figure out that printing represents the only feasible political option. Any cuts or tax increases are merely fighting positions to fortify the facade, as there's simply no way they could be changed enough to make a meaningful difference.
Slow Mo Hyper-DeValuation is the current program, soon to pick up speed. After HDV, beer will really be 5 copper cents, worth $.13 today. The 5¢ nickel is worth $.06, a 20% premium. Saving nickels is an instant 20% on cash, though it is currently illegal to melt them or copper cents.
This doesn't mean they won't trade like bullion coins do now, valued at the metal content and assayed by the former - late- historic US government.
Really smart people are checking out seed exchanges for when they will grow veggies on their front lawn and skip buying hybrid seeds from stores. More suburban communities areound Chicago are seeing chicken-growing as a new fad.
What did the old 49ers chasing gold in California pay for eggs? A lot! Those times are coming back
Unlike FedGov, states and local municipalities have no de jure power to print money. Unless a state secedes from the union and becomes its own sovereign nation.
If Ctrl-P is indeed the answer, it will have to be done in a backdoor fashion, coordinated between FedGov, state and local government, and the Federal Reserve.
And the only way the Federal Reserve is going to get on board with a plan like that is if the primary dealers can make a killing on the deal.
Ditto. it's control-P. in the old computer days (daze) we'd write it: ^P
some new guy/gal is gonna choose ^P for their login/member name... ;)
I think if we can figure out a way to exterminate at least half of those 10,000 every day, we'll be all right.