Public Pension Plans and the Time Bomb Inside


City workers ,Police , Teachers and Unions. Employees have paid into there pension plans for decades. All expecting upon retirement a large and healthy pension to take care of them in there golden years. There just might be a time bomb inside. Yes the Public Pension Plans and the Time Bomb Inside. Moody’s Investors Service recently estimated that public pensions are underfunded by $4.4 trillion. That amount, which is equivalent to the economy of Germany, accounts for one-fifth of national debt. It’s a significant concern for public employees who were banking on a fully funded retirement to get them through their retirement years.

 

This of course is because of the huge debt that the world has gotten itself into. And there looks like there might not be a way out. Trillions of dollars keep getting added onto the national debt of not just the U.S. Up here in Canada we are in the same debt boat. Being dependent on the Yanks for our  economic well being  is a well known fact. Attempts by radicals to stop the oil flow pipelines to the rest of the world is not helping. A financial crisis in the U.S. could bring us all down with them.

 

No time left

 

You must remember that a lot of pension plans took on higher risks to make up for the short falls in the collapse  of the housing bubble. To make up for losses they poured a higher percentage of money into stocks. This could prove quite dangerous as governments are reigning in the housing bubbles across the world. When the bubble pops both in real estate and stocks retiring pensioners will be affected. Think not? It has happened before.

After the financial crisis where state and local pensions lost 35% to 40% of their money. It’s true that things have been doing a little bit better in terms of their investments, but still the fundamental flaw is that over the years employees were offered a future benefit that was hopeful on future gains of stocks, bonds and real estate. Bad investments or economic downturns rake havoc on your pension plan be it government or private.

 

Pension Contributions too Low

 

The  pension hole will swallow public and private-sector employees alike.All income earners will have to pay for it. A simple calculation to illustrate this  point.  If the shortfall were $5 trillion, divide that amount by the 158 million workers in the American labor force for an obligation of about $32,000 per worker.

That gives you a concrete sense of the shortfall that there going to have . A lot of people don’t have $32,000 for their own retirement, much less to pay for state and local workers. Governments are probably underestimating pension debt because they are allowed to use whatever actuarial assumptions that they feel like without any oversight from the federal government. While states and municipalities are reporting that they are 72% funded, the real rate is closer to 45%.

Broaden that to the federal level, where the impending shortfall in Social Security is well-documented, and the scope of the problem grows. Instead of $32,000 per worker, it’s about $171,000.

 

Zoomers are the culprit

 

As the U.S. is now shutting the door to immigration the problem only deepens. As more and more baby boomers retire the pension plans across North America will start to crack. More and more money will be going out to pay these zoomers and less money coming in. The unemployment rate might be down but there will also be less and less workers. With wages not rising to pay for these boomers retirement plan the government will print money.

 

This only means one thing. Your pensions dollars buying power will shrink into lower and lower buying power. Governments around the world will have no choice but to print money to pay for this trillion dollar shortfall.

 

Save Your Pennies

Pension Plans
Pension Plans

and make sure there silver.

 

The professors have some advice for public-sector workers who are counting on a pension — don’t. Professors agree that many of the proposed solutions being floated are unlikely to fill the pension hole because the only way to get bigger investment returns is to take on greater risk. The stock market is just too volatile for that.Ultimately, everyone will pay. A recent study that contended property owners will be held responsible for unfunded liability through what could be considered a stealth  tax.

 

Just the idea of taxing future workers to pay for the pensions of retirees is quite alarming.  A smaller future work force would not be happy with the added taxes. Unless higher wages catch up to the ever growing cost of health care, housing and food I doubt we will see this. In my eyes view this looks to me like we might see higher inflation on the horizon. What will high inflation do to your future pension. Destroy it’s buying power.

 

Trump

 

We can’t have a discussion about the future pension plans dilemma without talking a little about Trump and his policies. Tariff wars are not healthy for pension plans. Why? One reason is they will raise the prices of your retirement costs. You will be paying more for everything. This is called inflation. One thing that might help the pensions is Trumps tax cuts. As more and more corporations buy back their stocks the pension funds that took on a higher risk will benefit.

 

One problem with these higher risk investments is the real future reality of a financial crisis which will cause these paper assets to come crashing down. Risk has never been higher as we are in the biggest stock bubble the world has ever witnessed. Look out below.

 

Opinion

 

I am not a futuristic clairvoyant or a time traveler so I cannot say what the future might hold. Stay well diversified in high quality dividend stocks and assets that prove to hold value during inflation. Deflation seems quite unlikely in this day and age of the printing presses. A little silver or gold could never hurt and getting out of debt is a good idea if interest rates soar.

 

Don’t depend on a high paying pension from the government they could go broke.

 

Zoomer

 

 

About zoomersnews 107 Articles
Brent Arnold Walker is the Editor of Zoomers News...Location South Vancouver BC Canada...Raised in the heart of War Vet Housing ...A True Baby Boomer

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