Pensions ‘Cash Negative’ By 2016 - ‘Timebomb’ Looms

GoldCore's picture

America's sprawling 401(k) pension system will turn cash flow negative in 2016, threatening disruption for asset managers and selling of equities, according to analysis by Cerulli Associates, a research house.

The $3.5 trillion system attracted fresh contributions of $300 billion in 2012, with $276 billion either withdrawn as cash by retirees or rolled over into individual retirement accounts (IRAs), Cerulli estimated according to the
FT. The IRA market is already larger at about $5.4 trillion.

However, by 2016 it forecasts that inflows will be $364 billion and outflows $366 billion, with the deficit only widening year on year after that as the core of the baby-boomer generation retires contributing to the pensions timebomb.

"This has significant implications for asset managers and other financial services providers," said Bing Waldert, a director at Cerulli. "It is going to be a disappointment for a lot of fund managers that have put a lot of effort into the DC [defined contribution pension fund] market.

The largest managers in the 401(k) market are Fidelity Investments; Canada's Power Financial, which owns Great-West Financial and Putnam Investments; TIAA-CREF; Vanguard; ING of the Netherlands and Prudential Financial of the U.S.

Funds run by such managers are typically among 10 to 20 options available to 401(k) savers, but when money is rolled over into an IRA, they face far stronger competition.

In IRAs you do not only have access to expensive funds run by asset managers, you have access to investments globally. There is more freedom and flexibility as there are insurance-based products, ETFs [exchange traded funds] and individual securities. In recent years, there have seen a large increase in allocations to gold in IRAs as investors seek to diversify into the safe haven asset.

The combined value of the U.S. pensions system is some $9 trillion. The total market valuation of the global bond market is now over $100 trillion. By comparison, the total market value of all the gold in world is estimated to be just over $1 trillion.

The decision to apportion retirement savings into gold and other precious metals is being taken by an increasing number of U.S. citizens who understand that the value of the U.S. dollar is being silently eroded by inflation.

Self-directed pensions, including IRAs, permit a wide range of gold investments to be included. SIPPs in the UK and self directed pensions in Ireland also allow allocations to gold.

Although one should be cautious about investing in any paper gold product as it is very different and more high risk than owning allocated and segregated physical gold. Paper gold includes gold futures, gold futures options, some gold ETFs, certain forms of unallocated gold ownership, pool accounts, contracts for difference (CFDs), spread betting contracts, gold stocks and gold options.

Self-directed retirement schemes with a gold and or precious metals allocation are a prudent retirement planning tool. Considering the continuing financial malaise affecting the U.S. and much of the western world, they will continue to protect and grow pension wealth in the coming years.

Pensions throughout the western world are in peril due to the pension Ponzi scheme. Powerful forces of both the inflation caused by 100 years of the Federal Reserve debasing the dollar and a possible deflationary crisis due to massive levels of debt globally will be a double whammy which will hit traditional investments such as stocks, property and bonds.

Without an allocation to gold, you are not going to have a comfortable retirement ? Putting Gold Bullion In Your Individual Retirement Account (IRA)

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D-liverSil-ver's picture

I work for a large Chemical company and our previous CEO underfunded the pension fund because a large portion of his compensation was in the form of a bonus based on profitability.

He underfunded the Pension by 40% and got a 10million dollar bonus that year.

Unfortunately when he left the next CEO had to clean up his mess, so my pension dropped by 40% but the new CEO gave us sizeable raises and will do a 100% match up to 8% of our salary in our 401K for the next 3 years to help compensate our loss.  Pretty honorable thing to do, since he really didn't have to do anything.

SmittyinLA's picture

Bullshit, that authors act like US pension and US equities are connected, they're not, US equities are basically global equities owned mostly by foreigners, any inflow deficits from Americans will be obliterated by inflows from foreign investers.

GM XOM aren't American companies owned by Americans, they're global companies owned by the global community.

NoWayJose's picture

I am sure most pension plans would live to see 4% rates on 10 year Treasuries instead. Not only has the Fed destroyed Granny at her local bank, but those unintended consequences are hurting pensions and even money market accounts.

kurt's picture

Certain groups are gaming social security in a desire to privatize it, that is they want the money to be private in their own hands, to steal it. Blackstone and Richardsen have a think tank and office dedicated to the prospect. Don't believe anything. Demand that your contracts be honored. When it comes to retirement there are NO go backs. You can't relive your life. There is no second chance to build a savings or pension.

We need to be deadly serious to the government, regulatory, legislative, enforcement, politicians, and corporations.

Don't game us. Honor your promises. No excuses.

Reverse Citizens United before it's too late.

Steaming_Wookie_Doo's picture

I appreciate the sentiment, but what do you do when the cupboard is bare? Go into incredible levels of debt to pay for benefits of the retired when there are fewer and fewer working to save for themselves and pay interest on this new debt? I don't deny that pension funds (and their recipients) have been robbed. You can look forward to 2 possible scenarios: 1. That fewer dollars will come than were promised in your pension. 2. That seriously inflated dollars will fulfill the exact amount of the pensions, but that their overall buying power is drastically reduced, i.e. $25 for a loaf of bread.

Bemused Observer's picture

Pensions, and pension funds, are not new. They've been around a long time, and have worked pretty well...
UNTIL the financial world got their damned hands on them! They gambled with the money, lost, and are now trying to walk away leaving the pensioners stuck with the losses...Any complaints, and those same pensioners are labeled "greedy takers" for wanting to collect on what they were promised...
Maybe 'employees' ought to change their name to 'shareholders' and see if that helps to get them off the "Pay No Mind" list...

dearth vader's picture

When life's reduced to bread and circuses what can people do but act like clowns?

Comte d'herblay's picture

Yer not paying attention, GoldCore!!

What do you think has been going on for the last 6 years???  

Anyone with a pension, 401k, or other deferred comp plan is heavily invested in a stock market that is at all time highs.  This is the most audacious strategy ever devised by man for the FED to act as buyer of last resort.  No securities held in mutuals, or self directed retirement vehicles are going to be liquidated at substantially lower prices than now for the next 50 yrs let alone 2016.  (and don't forget Hillary is a cock sucker for Wall Street dick).

The only reason the FED has been sending Lloyd and his confreres a trillion dollars and will continue to send it to them is precisely to ward off a collapse in security values for retirees, currently gone fishin', at the rate of 10,000 a  month, and they are ALL getting the full value of their savings. And they will continue to get it, and spend it, and that is like a Coney Island Merry-go-Round insuring at least a stagflated economy, which is far far better than the alternative.

Stop with the bearish attitude, you are demonstrating you have no deductive reasoning powers. 



Bemused Observer's picture

Those funds have no choice but to be heavily and completely invested. It is the only way to restore the funds that have been looted from those accounts.
Of course, should that decision prove to be profitable, you can bet that those funds will be re-looted to skim that off...

WmMcK's picture

Merry-go-Round will become Cyclone.

MrPalladium's picture

"you are demonstrating you have no deductive reasoning powers"

Actually predictive reasoning from present facts.

What we see in the stock market today is exactly what you would expect to see at the very early stages of hyperinflation, before the inflation is a visible problem. In the early stages stocks do very well.

You are also seeing a classic example of Vilfedo Pareto's law - "One half of one parcent run the show and get the lions share of the benefits, but must keep the next 20% happy to insure stability of the system. The 80% don't matter."

The fed is just greasing the palm of the next 20 percent on the cheap by printing money.

Of course we need a crisis fed crash to really get the presses rolling.

Bemused Observer's picture

I'm going to ask an honest question here, and hope someone can give me an answer...without resorting to calling me an 'idiot'...:-)

How can a debt-based currency system get to "hyperinflation"? If all money is debt, then any NEW money would require someone else to borrow those funds into existence. But, with loans becoming more and more difficult to get, and fewer and fewer folks are willing to borrow, where is that extra money (needed to inflate) going to come from?

I know about the overseas money, but how much of that is in the form of circulating currency? For it to 'inflate' the economy by coming 'home', it would have to get into the hands of the folks who will spend it.
And where will THEY get the extra money? Most get their money by working for wages, and NOBODY seems to want to raise wages even by a bit, never mind the massive increases needed to fuel inflationary spending...

I do understand the whole 'printing money' thing, but it seems to me that too many other necessary conditions are just not in place for hyperinflation. I CAN see something like that occurring in certain asset classes, but I can't see how it would spread to the general economy...

So, please someone enlighten me here...

D-liverSil-ver's picture

In other countries that have had cost push inflation it starts when neccessities cost more than the minimum wage workers can afford. They strike or just don't show up for work until they get a raise. The people one step above them complain because the lower people are now making what they are making and they want a raise too.

On and on up the ladder, the cost to produce goods goes up and it makes everything cost even more.

In the US many minimum wage restaurant workers are pushing for an increase in minimum wage, some want $15/hr in metroplitan areas! This could start the fire.



Citxmech's picture

Hyper-inflation happens independant of printing when nobody wants to accept FRNs as payment.  The shit then becomes worthless pretty quick.

Bemused Observer's picture

Well, I can definitely see how certain asset classes would hyperinflate, but it seems that that would be a phenomenon restricted to the players in that area who are using forms of digital currencies the common man does not use.
When I think of a traditional hyperinflation, I am imagining the average person taking wheelbarrows of money to the grocery store. But I'm not seeing the other necessary factors for that to happen. Wages would have to skyrocket to fill those wheelbarrows.
So, maybe we are in some 'new territory', where we will see targeted hyperinflation in some areas, and stagnant or declining prices in other areas...with the Fed playing wack-a-mole trying to 'control' it.

Citxmech's picture

To add a bit more subtlety into the lesson - look up "Bi-Flation."  I think that's pretty much exactly what we've got here:  

Massive printing tied-up in keeping the banks solvent, interest rates down through bond purchases, the stock markets up, and futures markets manipulated downward - while credit-based non-essential asset classes deflate and cash-based essential commodities skyrocket.  

donsluck's picture

First comes the deflation, where electronic forms of everything loose value, forcing debtors to pay with cash. The response is the printing of literal cash and buying up the debt (QE). As the physical cash hits the street hyperinflation ensues.

Those married to the electronic "cash" will be the first to be wiped out, but eventually everyone is wiped out, except the oligarcs who bought their islands and private armies. Even they will "suffer" until a new monetary system is in place.

Comte d'herblay's picture

While possible, not probable. In our lifetime. 

The Mafia on Wall Street that caused the panic of 2008 made a millennial mistake, not likely to do it again, when they need not rip off the other gamblers.  They need not because they are being bribed to the tune of over several trillion that we know of by the FED, and being structurally supported by the ZIRP "loans"  to do so.

Those loans do not require any collateral, so they are an out and out gift, bribe, or other payoff to keep the markets reasonably copacetic for the long forseeable future.

If you're short you're gonna continue to lose. This principle as we all know from this blog has been the operational one of the few men who control absolutely the creation of money, and much more importantly, to see that that eventual quadrillions does not leak in any massive way into the national or global economies thru loans to the proletariat which will only be for the most worthy and near certainly will pay it back. 

The Usurers have won the game, and they are sophisticated enough to not kill a very very golden goose.

J B T F D 



Comte d'herblay's picture

Prediction comes after deduction.

It  must be deduced from the past activity of the Banksters getting off scott free by both Admenstruations.  Why?  The few men who are in control of printing money sat down with the mortgage fraudsters, told them that if they wish to avoid indictments for ripping off world economies for quadrillions of dollars, with their mortagage backed securities which were worth less than hillary clinton's used toilet paper, that they would now act to stabilize world markets by 'rebuying'  the securities they sold in the stock market and all those real estate funds to get back to former 2007 levels, and throw in another 10% for lost opportunities.

The FED guaranteed them the freshly printed money at ZIRP rates, which, after taking out multibillions in 'bonuses' for doing god's work, they have been putting to use in the stock and treasury markets.  


And will continue to do so. The predictive reasoning part. 


financialrealist's picture

You are also seeing a classic example of Vilfedo Pareto's law - "One half of one parcent run the show and get the lions share of the benefits, but must keep the next 20% happy to insure stability of the system. The 80% don't matter."

I agree, the 20% is the new middle class.. you either will have too much, barely enough, or nothing....

dearth vader's picture

>> By comparison, the total market value of all the gold in world is estimated to be just over $1 trillion. <<

Can this be true? Above ground gold stack is estimated at 175,000 tonnes.

Today's price per kilo of US$40,000 makes for TMV of US$7 trillion, not $1 trillion.

The Longest Call's picture

"Without an allocation to gold, you are not going to have a comfortable retirement ? Putting Gold Bullion In Your Individual Retirement Account (IRA)"

C'mon Goldcore, your solution is as bad or worse than buying paper gold, which you advise against.  I don't care if it's physical bullion...  If it's held by a 3rd party trustee, YOU DON"T OWN IT....

This is the only way I've found to get your hands on IRA gold:



DadzMad's picture

Thanks for the link.  I've been looking into this for some time and have found conflicting information.  Do you have experience working with this company?


financialrealist's picture

Too bad he missed the bigger issue and used a good narrative as a plug…. The bigger issue is the MULTI TRILLION deficit for US Pensions; which will get worse as the market crashes, discount rates decline further and MILLIONS of retirees who were promised benefits get hosed and are forced to continue work crowding out employment for the younger generations.  Inadequate 401k/IRA’s are the least of our problems…

p00k1e's picture

Life is cheaper with a paid-off house Vs a busted 401K plan.

You can do it.

what&#039;s that smell's picture

here's a solution.

don't pay the benefits and give the money to wall street.

p00k1e's picture

How do we non-union types free ourselves from bailing out the unions? 

These bailouts really piss me off. 

Detroit has been in decline since 1950.  That’s the entire lifecycle of the stewards of that city.    They ran the city into the ground since birth, yet still will receive pension plan payouts.  This is simply not fair.

I can’t wait until that doc says, ‘p00k1e, you only have sic months to live.  Enjoy the time you have left.” 

Bemused Observer's picture

Well, if those pension plans for the stewards were not tied to the rest (the working slobs who EARNED them over many years) it would be an easy call.

Unfortunately they are, which means you have to fuck over hundreds of innocents to nail each 'steward'...

And I maintain that there HAS to be a better way.

And I'd like to ask you why you aren't as miffed over Congressional lifetime pensions, which exceed by far any of those being collected by the rank and file public workers?...(who incidentally are NOT the 'enemy'...)

p00k1e's picture


I wrote my congressman.  I wrote the governor.  A blind eye. 

For example, like Detroit, GM went belly-up.  The stewards of GM – the workers for the last 50 years - should not be receiving pensions.  C’mon, pensions weren't earned.  (I wrote Bush on this one and he handed it off to Obama.)


Lostinfortwalton's picture

Seems like a share of Exxon is the new $100 dollar bill? Price is around $100, it pays 2.76% dividend, and can more eaisly be converted to cash than gold when needed. Downside?

Citxmech's picture

So let's see - you'd need something like $1.2million in stock to gross $35k/year ?

JRobby's picture

Chevron , better yield.

XOM's balance sheet is larger than most nations and their product has inelastic demand. So, yea.


hootowl's picture

What good is a 2.76% dividend when we consider an average 5%+ real annual devaluation of the dollar?

Lostinfortwalton's picture

Well in the few years we have owned it there has been a price appreciation from $89 to $102 in addition to the dividends. Where would you put your retirement money?

NotApplicable's picture

Tangible assets. Hopefully undervalued ones (assuming there are any).

Paper is for fools and insiders ("club members"). Even if it does retain value, you're still an unsecured creditor to the true owner of the paper, the DTCC.

Basically you're one bank holiday from being "bailed-in" so that the system can be "saved." DTCC is the gatekeeper.

OceanX's picture

"Tangible assets. Hopefully undervalued ones (assuming there are any)."

Silver is on sale...

messymerry's picture

When the collapse comes, oil consumption will drop precipitiously...

GOSPLAN HERO's picture

FEMA camp buses will need more fuel

JRobby's picture

No where to go, nothing to do except gather.

Lostinfortwalton's picture

If the price drops but Exxon can maintain the dividend the yield increases as the price declines acting as a brake on the stock price decline? I just think those who hold gold may be faced with extremely high conversion costs, fees, and taxes, when trying to convert some of their holdings back to cash.

GubbermintWorker's picture

Conversion costs, fees, and taxes?!?


LOL, stay out of physical pm's if you don't know how to discretely liquidate.

Thisson's picture

That's great until you wake up one day and your electronic brokerage account is inaccessible because it's been subjected to capital controls or bail-ins.

Lostinfortwalton's picture

You can take delivery of stock certificates and put them in the family safe if you wish; I have done so in the past..

JRobby's picture

That could be the violence trigger. Unless of course it has started before that event.

AdvancingTime's picture

There is a new normal when it comes to investing that many have not accounted for, moderate portfolios these days are hoping for an annual gain of 5 to 7 percent. The likeliness that they will consistently earn 7.5 percent on a conservatively managed portfolio, as anticipated by its fund managers, is unlikely.

Lately the markets have been hooked on monetary morphine and ignoring fundamentals. Many of the financial structures we have built are on flimsy foundations or unsustainable. If the wheels come off the financial system pension plans will take a direct hit. To those who base their future on money coming from these monthly payouts I urge caution, prepare to take a "haircut" or worse. More on the subject of pensions going bad in the article below.

RaceToTheBottom's picture

Risk has been managed out of the system.  All engines forward!!!!