Your Pension Will Be At The Center Of America's Next Financial Crisis

Tyler Durden's picture

Authored by Jeff Reeves via The Hill

I’m not a fan of the “greed is good” mentality of Wall Street investment firms. But the next financial crisis that rocks America won’t be driven by bankers behaving badly. It will in fact be driven by pension funds that cannot pay out what they promised to retirees. According to one pension advocacy organization, nearly 1 million working and retired Americans are covered by pension plans at the risk of collapse.

The looming pension crisis is not limited by geography or economic focus. These including former public employees, such as members of South Carolina’s government pension plan, which covers roughly 550,000 people — one out of nine state residents — and is a staggering $24.1 billion in the red. These include former blue collar workers such as roughly 100,000 coal miners who face serious cuts in pension payments and health coverage thanks to a nearly $6 billion shortfall in the plan for the United Mine Workers of America. And when the bill comes due, we will all be in very big trouble.

It’s bad enough to consider the philosophical fallout here, with reneging on the promise of a pension and thus causing even more distrust of bankers and retirement planners. But I’m speaking about a cold, numbers-based perspective that causes a drag on many parts of the American economy. Consider the following.

Pensioners have no flexibility

According to a Bureau of Labor Statistics report from 2015, the average household income of someone older than age 75 is $34,097 and their average expenses exceed that slightly, at $34,382. It is not an exaggeration, then, to say that even a modest reduction in retirement income makes the typical budget of a 75-year-old unsustainable — even when the average budget is far from luxurious at current levels. This inflexibility is a hard financial reality of someone who is no longer able to work and is reliant on means other than labor to make ends meet.

Social Security is in a tight spot

So who will step up to support these former pensioners? Perhaps the government, via Social Security, except that program itself is in crisis and will see its trust fund go to zero just 17 years from now, in 2034, based on the current structure of the program. If millions of pensions go bust and retirees have no other savings to fall back on, it will be nigh impossible to cut benefits or reduce the drag on this program. But won’t a pension collapse mean we desperately need Social Security, even in an imperfect form, well beyond 2034?



The guaranty is no solution

There is an organization, the Pension Benefit Guaranty Corporation (PBGC), which is meant to insure pensions against failure. However, it was created in 1974 as part of a host of financial reforms and is far from a perfect solution, primarily because it is funded by premiums from defined-benefit plan sponsors and assets seized from former plan sponsors that have entered bankruptcy.

What happens when a handful of troubled pension funds turns into dozens or hundreds? Remember, the PBGC guarantees a certain amount that is decidedly lower than your full pension — as members of the Road Carriers 707 pension fund learned when the group “protected” their pensions by helping to pay benefits, which had been reduced from $1,313 per month to $570. That’s better than zero, but hardly encouraging.

This is not about helping Baby Boomers fund an annual cruise to the Caribbean. Older, low-income pensioners are not saving their money. Instead, they’re spending it on necessities such as food, housing, healthcare and transportation. That means every penny you reduce from their budget means a penny in spending that is removed from the U.S. economy.

Anyone who has taken Econ 101 knows about the “multiplier effect” where $1 in extra spending can produce a much larger amount of economic activity as that dollar circulates around businesses, consumers and banks … or in this case, how $1 less in spending causes a an equally powerful cascade of negative consequences.

By helping ward against a pension crisis, America will be protecting its economy for everyone — plain and simple. But that requires some tough decisions on all sides. For instance, the U.S. Treasury denied a cut to New York Teamsters’ pension plan that was proposed last year. But now the fund is on the brink of collapse, and its recipients are facing benefits that are in some cases one-third what they were 15 years ago.

Like Social Security, current workers can’t contribute enough to offset the big obligations owed to retirees. And as with the flagship entitlement program, it’s up to regulators and legislators to step in — even when it may not be easy — in order to keep the system from collapsing. Let’s hope they make both pension reform and Social Security reform a priority in the near future.

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Hitlery_4_Dictator's picture

Too bad, so sad. Fake it till you make it bitchez.

Signed Generation X

38BWD22's picture



I don't have a pension, nor am I even eligible for Social Security.  So it doesn't matter to me.

It's all fake anyway.


JRobby's picture

That will be the point when all the "non believers" will wake up. Too late of course. The acknowledgement that the "conspiracy nut jobs" were right all along will kill many of them.

knukles's picture

Kill all the actuaries first
   - Bill "The big one got away" Shakespeare

Winston Churchill's picture

Actuaries are just peeps that found accounting too exciting.

Bigly's picture

I upvoted you.

Maybe most here do not know actuaries so they do not get it.  Unfortunately, I do 

philipat's picture

Um, nobody has mentioned the Fed. ZIRP and NIRP, designed to provide free money for Corporations and the top 1%, has reduced (Perhaps always unrealistic) investment returns to the point that pension failure was inevitable. So the blame here does get shared by Wall Street, via the Fed, which it (literally) owns. The Fed and Wall Street don't give a shit about your pension; but neither does Congress.

Stuck on Zero's picture

So, if the kids have returned from college and are living in the parents basement where are the parents going to live?

techies-r-us's picture
techies-r-us (not verified) Stuck on Zero Mar 26, 2017 10:43 PM

No worries there. The next financial CATACLYSM will be UGLY and BLOODY.

Mano-A-Mano's picture
Mano-A-Mano (not verified) techies-r-us Mar 26, 2017 10:46 PM

Worse than 2008?

Boy, are we in trouble then.

Offthebeach's picture

There sre still vast swaths of things that are owened that can be fanacialized and made into credit and traded paper.  Cars, if allowed, can be rented and all leased.  Furniture leased. Food can be financed.  Body organ insurance.  Obamacare taxes and money schemes will be kept by fedgov but more and more "supplemental insurance ", the total of which will exceed the original payments of a Cadillac Blue Cross/Shield did cost pre "reforms".  So there is vast sums to be harvested.  ....Basically everything that isn't already taxed less than 5 times now will be taxed upto 5 times until it is noticed the sheeple accepted being taxed 6 times...

Bastiat's picture

Let's see how much would it cost in digi-bucks to bail out every pension plan in the country vs how many were created to save the raketeering bankster scum?

How about this: the Pension Guarantee Benefit Guarantee Corporation issues bonds every year sufficient to back up the pensions that move into compliance with reasonable restrictions (eliminating abuses etc.).  The pensions that don't comply are on their own.  The Fed buys these bonds because no one else deserves this crap and they've already shown how much they love shit paper.  They either buy the bonds or their charter is revoked and we move to a new new currency, cancelling any federal obligations owned by the Fed.  XXXOOO Janet.

natxlaw's picture

we can't do this. It would actually be fair.

lasvegaspersona's picture

Letting the dollar die solves a lot of political problems.

It will expose the real ones of an economy which no longer creates real wealth.

The new currency might work but in France (late 1790s) and Weimar (1924, 1930 and 1945) even the follow up currency was overprinted....usually they get it right the third toime or just use the currency of a large neighboring country

Offthebeach's picture

After "third time" was after WWII.   Killing 40 million people is a rough creative destruction  road to price discovery.   

marathonman's picture

Resolve the labor oversupply, develop some new technology, get those nationalist juices flowing, ensure the moentary Ponzi keeps expanding, and reap a basket of broken window benefits.  Yep, the solution is war.  Sorry to say it.

Caught_Fish's picture

Is this the same country that was pumping 85 billion a month into the economy?

Wouldn't a month cover it.

divingengineer's picture

$85 billion a month, a trillion a year for wall st. or war is no problem. A few billion for pensioners is out of the question.
This country deserves to crash and burn.

OverTheHedge's picture

Seems to me this is easily fixed by a couple of years of 30% stock-market gains.

So, inflation @ 50%, and everyone wins.

OverTheHedge's picture

Actually, I think I may have missed a zero:

300% gains, and 500% inflation, per year, for 10 years. Would that be enough? I think we need an actuary.....




GooseShtepping Moron's picture

Far be it from me to defend the Fed, but this isn't really their fault. It's demographics and globaliation that's making these pension plans insolvent. There is no organic growth in any developed country in the world, and there aren't enough young workers to pay for all the retirees. All other things being equal, this would have happened with or without fiat money.

acetinker's picture

Not the Fed's fault, you say?

Actually, NONE of the insolvent ponzi schemes we have today would have been possible absent the Fed.

You musta missed ZeroHedge 101.

divingengineer's picture

Couple trillion to Wall Street, couple trillion on wars, pretty soon you're talking about some real money.

lasvegaspersona's picture

Actuaries do alright. They know what's coming, they get paid...and then their foresight is completely ignored by wishful thinkers, schemers and politicians.

Haus-Targaryen's picture

You boomers made your bed, voting for this free shit for the past 4 decades, now you'll get to lie in it. 

Newbie lurker's picture

No no no! You are supposed to blame the millennials!!! Duh!
Don't you now all the current problems in America are because of the newest voting block (insert massive rolling eyes emoji here)

chubbar's picture

I don't think many boomers feel that the 12+% paid out of their paychecks to the gov't (including employers pymt) for SS seemed like it was a freebie. In fact, many boomers, had they been given those funds that were taken from them by force, would probably have a decent IRA to fall back on. But, congress made that program a ponzi and the funds that were taken from paychecks in excess of what was paid out that year, went into general revenues where they were promptly spent on wasteful programs and kickbacks to the congress.

I remember the debate back in early 80's (I think) to take SS excess out of general revenues and put it in a "lock box" but that wouldn't have worked any better because it has to go somewhere so it would either go to wallstreet or the gov't in bonds. Regardless, it certainly isn't "free shit" although the boomer DEMS certainly did vote for lots of free shit so I guess in effect you are correct that free shit BK'd the gov't which BK's the SS fund.

That all being said, they will just print the money, they don't have any choice. So everyone will get the dollars promised, they just won't buy jack shit, which is essentially what Greenspan was quoted saying.

crazytime's picture

I never realized I was in on it until learning the truth about our money. Borrow from a banker, you're in on it. I've sworn off, never again. Not much we can do about the fedgov though. They'll run it till it blows.

philipat's picture

Here we go again...divide and conquer, which is exactly what "they" want. It is correct that demographics are contributing to the problem but, as noted above, whatever generation plays according to the rules that society, and that applied equally to the boomers. They paid what they were required to and expected what they were promised by society in return. It is financial engineering, Wall Street and the Fed (NIRP and ZIRP) who created this problem off the backs of working people to benefit the few. If we lose this truth, they win. Again, and nothing will change.

Disclosure. I am a boomer, I don't rely upon SS and I have no pension but worked and succeeded in business and invested in the future so that I could provide for my family (College fully paid without student debt, "Healthcare" etc) and my wife and I upon retirement to live comfortably and travel when/where we like. This used to be known as taking personal responsibility and was an integral part of The American Dream.

aurum4040's picture

I respect your success. But don't think the intelligent genxers and yes there are some millenials who are intelligent do not realize that boomers had it quite easy. They had a currency that was sound until 1971 and pretty sound through the 90's. They didnt pay 200k++++ for a nice house or 25k-50k for a new or newer car. They werent required to have both parents working. College was dirt cheap. Food was dirt cheap. They didnt have CEOs making 30 to 50 times or more the average salary. They didnt deal with global competition AKA globalism. They didnt deal with a consistently high oil/fossil fuel price. Health care was cheap and disease/cancer wasnt nearly as prevalent. You didnt have expensive insurance of all types. You didnt have to spend anywhere near the money on your children in terms of everything including child care, food, clothing, college and keeping up with what the bullshit that our materialistic society rams down our kids throats. Nor do you or did you have to plan for the fact that SS and Medicare will not be existent when I retire even though I am certainly paying what is required. I could keep  going with this but I think my point has been made. And when I say they, I am referring to YOU. So before you going spouting off about how you took personal responsibility how about you take the time to understand what responsibility really is in todays dollars and economic environment? Boomers had to walk up a hill both ways to school in the snow right? Bullshit. Boomers drove a SnowCat in those snowstorms(economic comp). If genxrs were alive in your time most would have hustled you and your boomer pals right out 'your market'. But hey, you did what you needed to do in your environment - I respect that. But not what you had to 'deal' with. 

Planet Israel's picture

You goyim should really stop your wingeing, we let you use our money for 100 years and you could have had never ending prosperity.  Instead you proved that you are incapable of manageing your lives.  The day is approaching when you will beg for us to pick up the pieces, and we will, but only after you have taken the chip.

SweetDougisaTwat's picture

Be careful with what you say, hooknose, lest you find yourself on a train headed for a shower.

holdbuysell's picture

Here's the Greenspan comment you referenced. An eye-opening 1 minute testimony.

Inzidious's picture

Shrug. They trusted the system, and the people running the system.

When it all fails I'll tell them the same thing I told my father when I woke up after 30 or so years - You were wrong. The system is not good. You can not ever assume people with authority will do the right thing, and SHOULD assume people in charge will always find moral justifications to steal wealth from those stupid enough to believe in them.

So far after 39 years I've yet to find an institution to prove me wrong. Even Buddhism in South East Asia is rampant with corruption. 

TeethVillage88s's picture

There is a case to be made here for negligence by a Generation that was moving into power and had largely acquired power over a nation.

- Gray Hairs/White hairs achieving power
- Fourth Turning Book, points toward Generational Power
- Visit Europe and you are immediately aware of Patriarchal power


So... But no one in the Boomer Generation will raise their hand and say 'Yes, I was responsible'.

- Plausible Deniability is now Congresses Mantra
- If you lead a large Organization, first thing you create branches or directorates to make the decisions so that you survive any controversy... True
- Congress plays a game, they are not responsible for war, legislation, nor budget
- Congress never takes on responsibility, NOR heads of US Agencies like the IRS... NSA... DNI... CIA... NSC... FISA... National Security Advisor
- What is the Responsibility of IBM, Microsoft, Apple, Yahoo, AT&T, Sprint, Verizon, CISCO, AMD, Samsung, ZTE, makers of Smart TVs... UN, UNESCO, BIS, WB, IMF, MI-5, MI-6, GCHQ

lasvegaspersona's picture



It is always the retirees who die starving in the streets.

Sure it looks like boomers will make out doesn't it. Just watch...who do you think these retirees getting screwed in this article are?

NoPension's picture

I don't got no pension.

toady's picture

It really is the only way to go. No pensions, no 401k contributions, no IRA, no, or as little as possible, SS witholding, nothing .gov or the big banks can get their hands on. 

If you're gonna work the market, make sure you're doing it with a gamblers mentality, because that's what it is! '

TheMeatTrapper's picture

Pensions are for government freeloaders. I simply shake my head at the idea of people getting money in the mail for not working.

Talk about a sweet gig!


Sanity Bear's picture

Yep - "pension" is just another word for "welfare".

It's not a coincidence that "pensioners" was the old socialist term for these masses of handout dependents.

lasvegaspersona's picture

A self employed person pays 15.2% of income (up to about $125,000 iirc) every year. I'd love to have the half mil plus back but the government has it. I only hope they will be able to pay what they said they would because when they take that much there isn't that much left for saving.

Offthebeach's picture

Gov slug ideal is two or more pensions and full disability  ( not actual, just declarative.  Also, hero sticker or plate )

Bigly's picture

What pension?

If you have one, you would be smart to get while the gettin's good

Yukon Cornholius's picture

I have a pension plan. But it involves a boat and some scuba gear.


Got The Wrong No's picture

Seems like I should take up a new hobby, night time lake pension hunting. 

natxlaw's picture

go ahead, Yukon, tell hiim which lake

SilverRoofer's picture

Speaking of

How much silver was used in the Manhattan project

Sudden Debt's picture


As so many pensioners find it normal that generation X won't have a pension, it's only just that the pensioners feel the burn also.


There's way to many people who don't give a fuck about anybody else. it's dog eat dog. Well, let them get what they find normal for others.

The same shit is happening here in Europe. Over here, our pension funds will run dry in 2018/19.

That's why it's good to own gold and silver because they'll confiscate all funds from the people to try to save it.

Jeffersonian Liberal's picture

As they have already started and will continue to amp up calling preppers "hoarders" and by so doing castigating them as being selfish, they will begin to call those who have a private retirement account (any type, but especially those who have had the privilege to create one without paying taxes...hint hint, 401Ks) greedy and selfish.

Preppers are not greedy and are not hoarders. When the collapse comes, preppers will be self-sufficient and therefore will not be draining the resources that the parasites so desperately depend upon.

Those who have a private retirement know that Social Security will not be there. We are far from fact, we are just the opposite. We pay our SS tax now to those who have retired and we do so knowing that when we cannot work we will receive nothing from the US government, that the system is already dead.

On top of paying our SS tax to those now taking it as a government handout, we are working hard to put something aside for when we can't that we won't drain the resources that the parasites so desperately depend upon.

But they will call this greed.

And they will call for the nationalization of our private retirement accounts.

The public pensions will fail.

The statists will hail them as our 'public servants who deserve to be treated better than this.'

The public unions and employees will take some token cut to show that they have skin in the game.

And the statists will use this to nationalize our private retirement accounts promising a solid 3% return when we are ready to retire.

It will be a lie, of course, and just another theft by the government and the parasites of those who work.