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Broken Promises: Pensions All Over America

ilene's picture




 

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

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.

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"My daughters grew up here, went to school here. It's all gone," said Mike Geoffroy, a retired firefighter.

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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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Thu, 03/15/2012 - 01:39 | 2256862 SunnyDD
SunnyDD's picture
Hahaha, Nope! Just exterminate that 10,000 Cabal gangsters.
Wed, 03/14/2012 - 17:51 | 2255928 Ruffcut
Ruffcut's picture

WTF is granny gonna eat now? Wet cat food has doubled in 3 years. Guess she will have to PURR at half speed.

Wed, 03/14/2012 - 15:34 | 2255476 Chuck Walla
Chuck Walla's picture

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.

 

Re-do the draft. I already did one war and lost, what's one more to an old man?

Wed, 03/14/2012 - 14:34 | 2255221 Seasmoke
Seasmoke's picture

if you take out the real abusers of the public pensions, police, fire and politicians , you probably only have to exterminate less than 1000 a day ......killing the cops and politicians saves lives, can be the new bumper sticker of public employees ......or CAP anyone with a public pension at $48,000 a year.......end of crisis

Wed, 03/14/2012 - 19:07 | 2256159 pashley1411
pashley1411's picture

I'm kind of thinking that a putting out a bounty on capping high-retirement individuals would both increase GDP and cut pension costs.   win-win!

Wed, 03/14/2012 - 23:21 | 2256669 FeralSerf
FeralSerf's picture

Take all of Jamie's, Lloyd's and their ilk's ill-gotten money away and give it to the pension funds.  Win-win!

Wed, 03/14/2012 - 17:12 | 2255828 Errol
Errol's picture

It would be very helpful if police and fire "20 and out" was changed to 30 years like the rest of us.

Turns out police isn't even in the top 10 of most dangerous occupations, but their impressive PR machine swings into action whenever a cop dies on the job.

BTW, the occupation in the US with the highest level of on-the-job fatalities is roofer.  They should just take a page from the cops and hold a big bagpipe parade every time a roofer falls off a roof...

Wed, 03/14/2012 - 20:14 | 2256329 lincolnsteffens
lincolnsteffens's picture

"What you mean us, white man?" I started working at 18 and I'm 65. Pension, what you mean pension? I don't get no stinkin' pension! I suppose I could collect  Soc. Sec. which wouldn't pay for much in the USA so I'm still working for myself and earning less. Yeah, I'm probably OK as long as Uncle Sam doesn't try to confiscate what I've squirreled away. Where you got the idea that after 30 years the rest of us get a pension is a mystery to me.

Wed, 03/14/2012 - 16:48 | 2255731 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Yeah, I can feel too sorry for the public pensioners who are making as much when they retire as they are working. Fire them and default on these few obligations and many of your problems go away.

Wed, 03/14/2012 - 13:39 | 2255024 Vince Clortho
Vince Clortho's picture

The Elite Global Sociopaths have been mulling over the overpopulation issue for some time.  I believe an extermination is on the table, and it wil involve alot more than half of the pension benefit group, which is really an insignificant number from a global perspective.

The big questions are How many people need to go to get to the optimum number, and what type of extermination would be the best.

Wed, 03/14/2012 - 14:52 | 2255278 johnQpublic
johnQpublic's picture

see georgia guidestone for that answer

max 500 million people on planet

see kissinger paper on how...

Wed, 03/14/2012 - 21:57 | 2256524 Cathartes Aura
Cathartes Aura's picture

look up.

sweat activated atmospheric spraying of "vaccines' via BGates is just one of the "answers" in store.

Wed, 03/14/2012 - 13:29 | 2254973 ilene
ilene's picture

That's funny, the title of my next post (at psw) is "The Politics of Medicare."  (p.s., I'm mostly kidding, I don't think we should exterminate anyone... I feel a need to say that here.)

Wed, 03/14/2012 - 21:35 | 2256476 LetThemEatRand
LetThemEatRand's picture

Hasn't Phil been saying for some time now that this problem could be solved by taking back a modest percentage of the loot stolen from the rest of us by the oligarchs?  

Wed, 03/14/2012 - 14:38 | 2255235 LowProfile
LowProfile's picture

.

Wed, 03/14/2012 - 15:28 | 2255454 CompassionateFascist
CompassionateFascist's picture

There will be more death, there will be more taxes. I'm torn between wishing for Ponzi collapse right away, so we can......Get-It-On.....and allowing the various debt pyramids to scale the walls even steeper for a few more months so that the ultimate Crash is even worse. I think the latter.

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