Posted on 07/25/2013 11:14:41 AM PDT by SeekAndFind
The pension nightmare that is at the heart of the horrific financial crisis in Detroit is just the tip of the iceberg of the coming retirement crisis that will shake America to the core. Right now, more than 10,000 Baby Boomers are hitting the age of 65 every single day, and this will continue to happen every single day until the year 2030. As a society, we have made trillions of dollars of financial promises to these Baby Boomers, and there is no way that we are going to be able to keep those promises. The money simply is not there. Yes, I suppose that we could eventually see a "super devaluation" of the U.S. dollar and keep our promises to the Baby Boomers using currency that is not worth much more than Monopoly money, but as it stands right now we simply do not have the resources to do what we said that we were going to do. The number of senior citizens in the United States is projected to more than double by the middle of the century, and it would have been nearly impossible to support them all even if we weren't in the midst of a long-term economic decline. Tens of millions of Americans that are eagerly looking forward to retirement are going to be in for a very rude awakening in the years ahead. There is going to be a lot of heartache and a lot of broken promises.
What is going on in Detroit right now is a perfect example of what will soon be happening all over the nation. Many city workers stuck with their jobs for decades because of the promise of a nice pension at the end of the rainbow. But now those promises are going up in smoke. There has even been talk that retirees will only end up getting about 10 cents for every dollar that they were promised.
Needless to say, many pensioners are extremely angry that the promises that were made to them are not going to be kept. The following is from a recent article in the New York Times...
Many retirees see the plan to cut their pensions as a betrayal, saying that they kept their end of a deal but that the city is now reneging. Retired city workers, police officers and 911 operators said in interviews that the promise of reliable retirement income had helped draw them to work for the City of Detroit in the first place, even if they sometimes had to accept smaller salaries or work nights or weekends.
“Does Detroit have a problem?” asked William Shine, 76, a retired police sergeant. “Absolutely. Did I create it? I don’t think so. They made me some promises, and I made them some promises. I kept my promises. They’re not going to keep theirs.”
But Detroit is far from an isolated case. As Detroit Mayor Dave Bing said the other day, many other cities are heading down the exact same path...
"We may be one of the first. We are the largest. But we absolutely will not be the last."
Yes, Detroit's financial problems are immense. But other major U.S. cities are facing unfunded pension liabilities that are even worse.
For example, here are the unfunded pension liabilities for four financially-troubled large U.S. cities...
Detroit: $3.5 billion
Baltimore: $680 million
Los Angeles: $9.4 billion
Chicago: $19 billion
When you break it down on a per citizen basis, Detroit is actually in better shape than the others...
Detroit: $7,145
Baltimore: $7,247
Los Angeles: $8,437
Chicago: $13,355
And many state governments are in similar shape. Right now, the state of Illinois has unfunded pension liabilities that total approximately $100 billion.
There are some financial "journalists" out there that are attempting to downplay this problem, but sticking our heads in the sand is not going to make any of this go away.
According to Northwestern University Professor John Rauh, the total amount of unfunded pension and healthcare obligations for retirees that state and local governments across the United States have accumulated is 4.4 trillion dollars.
So where are they going to get that money?
They are going to raise your taxes of course.
Just check out what is happening right now in Scranton, Pennsylvania...
Scranton taxpayers could face a 117 percent increase in taxes next year as the city's finances continue to spiral out of control.
A new analysis by the Pennsylvania Economy League projects an $18 million deficit for 2014, an amount so massive it outpaces the approximate $17 million the struggling city collects annually
A 117 percent tax increase?
What would Dwight Schrute think of that?
Perhaps you are reading this and you are assuming that your retirement is secure because you work in the private sector.
Well, just remember what happened to your 401k during the financial crisis of 2008. During the next major stock market crash, your 401k will likely get absolutely shredded. Many Americans will probably see the value of their 401k accounts go down by 50 percent or more.
And if you have stashed your retirement funds with the wrong firm, you could end up losing everything. Just ask anyone that had their nest eggs invested with MF Global.
But of course most Americans are woefully behind on saving for retirement anyway. A study conducted by Boston College's Center for Retirement Research found that American workers are $6.6 trillion short of what they need to retire comfortably.
That certainly isn't good news.
On top of everything else, the federal government has been recklessly irresponsible as far as planning for the retirement of the Baby Boomers is concerned.
As I noted yesterday, the U.S. government is facing a total of 222 trillion dollars in unfunded liabilities. Social Security and Medicare make up the bulk of that.
At this point, the number of Americans on Medicare is projected to grow from a little bit more than 50 million today to 73.2 million in 2025.
The number of Americans collecting Social Security benefits is projected to grow from about 56 million today to 91 million in 2035.
How is a society with a steadily declining economy going to care for them all adequately?
Yes, we truly are careening toward disaster.
If you are not convinced yet, here are some more numbers. The following stats are from one of my previous articles entitled "Do You Want To Scare A Baby Boomer?"...
1. Right now, there are somewhere around 40 million senior citizens in the United States. By 2050 that number is projected to skyrocket to 89 million.
2. According to one recent poll, 25 percent of all Americans in the 46 to 64-year-old age bracket have no retirement savings at all.
3. 26 percent of all Americans in the 46 to 64-year-old age bracket have no personal savings whatsoever.
4. One survey that covered all American workers found that 46 percent of them have less than $10,000 saved for retirement.
5. According to a survey conducted by the Employee Benefit Research Institute, "60 percent of American workers said the total value of their savings and investments is less than $25,000".
6. A Pew Research survey found that half of all Baby Boomers say that their household financial situations have deteriorated over the past year.
7. 67 percent of all American workers believe that they "are a little or a lot behind schedule on saving for retirement".
8. Today, one out of every six elderly Americans lives below the federal poverty line.
9. More elderly Americans than ever are finding that they must continue working once they reach their retirement years. Between 1985 and 2010, the percentage of Americans in the 65 to 69-year-old age bracket that were still working increased from 18 percent to 32 percent.
10. Back in 1991, half of all American workers planned to retire before they reached the age of 65. Today, that number has declined to 23 percent.
11. According to one recent survey, 70 percent of all American workers expect to continue working once they are "retired".
12. According to a poll conducted by AARP, 40 percent of all Baby Boomers plan to work "until they drop".
13. A poll conducted by CESI Debt Solutions found that 56 percent of American retirees still had outstanding debts when they retired.
14. Elderly Americans tend to carry much higher balances on their credit cards than younger Americans do. The following is from a recent CNBC article...
New research from the AARP also shows that those ages 50 and over are carrying higher balances on their credit cards -- $8,278 in 2012 compared to $6,258 for the under-50 population.
15. A study by a law professor at the University of Michigan found that Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States. Back in 2001, they only accounted for 12 percent of all bankruptcies.
16. Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.
17. What is causing most of these bankruptcies among the elderly? The number one cause is medical bills. According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States. Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.
18. In 1945, there were 42 workers for every retiree receiving Social Security benefits. Today, that number has fallen to 2.5 workers, and if you eliminate all government workers, that leaves only 1.6 private sector workers for every retiree receiving Social Security benefits.
19. Millions of elderly Americans these days are finding it very difficult to survive on just a Social Security check. The truth is that most Social Security checks simply are not that large. The following comes directly from the Social Security Administration website...
The average monthly Social Security benefit for a retired worker was about $1,230 at the beginning of 2012. This amount changes monthly based upon the total amount of all benefits paid and the total number of people receiving benefits.
You can view the rest of the statistics right here.
Sadly, most Americans are not aware of these things.
The mainstream media keeps most of the population entertained with distractions. This week it is the birth of the royal baby, and next week it will be something else.
Meanwhile, our problems just continue to get worse and worse.
There is no way in the world that we are going to be able to keep all of the financial promises that we have made to the Baby Boomers. A lot of them are going to end up bitterly disappointed.
All of this could have been avoided if we would have planned ahead as a society.
But that did not happen, and now we are all going to pay the price for it.
Let’s offshore more jobs so that there’s not a chance in H*** that we have enough workers to take care of our retirees.
Let’s offshore more jobs so that there’s not a chance in H*** that we have enough workers to take care of our retirees.
If I said “Give me all your retirement money, I’ll spend it, and then pay you when you retire out of whatever I am making then” you would laugh your head off at me
By the way, he was a DemocRAT.
Well, it certainly seems to be the case around where I live.
Well, the problem certainly isn’t limited to Detroit...
agreed... look, I am 60 and I’m one of those that will never be able to retire... never.... and I’m not crying about it, I’m more than willing to keep working. in fact, I think that would be best thing for me anyway.. that is to say, it’s good to keep occupied and have a task with responsibilities... most the retired folks I see, (with exceptions of course ) are 24/7 TV watchers. they get lazy, they lose focus, they begin to fade away....
Raise the retirement age to 71 to 73... that seems reasonable, considering modern healthcare advances.
and I’ll be d*amned if I’m going to pay taxes for someone who worked for the gov, to have a nice cozy retirement.. and that goes for teachers, etc... no exceptions...
but who am I kidding... of course that will happen... some of us are “more equal than others”.... sheesh Orwell had it figured out so long ago...
Right, but the article was about Detroit.
Setroit is the poster city for fraud and corruption.
Retirement at age 65 is a thing of the past and I like a lot of baby boomers will be working at least part time until I drop or am euthanized by Obamacare.
Of course no one (but me and a handful of others) paid the least bit of attention. America has been on a "Laissez le bon temps rouler" binge since the end of WWII. We've been living in an economic fool's paradise on borrowed and fiat money. That's all about to come to an end with tragic consequences for our country and the world.
hey, the dems have a plan for this: grant citizenship to all the illegals. they can pay for everything by mowing lawns and paying taxes., problem solved.
This boomer has no pensions but savings through IRA’s and 401-K. No guarantees but at least no government or corporation can jack it away in theft-—at least at this point in time. Pensions via govt tied in to taxpayers funding them to stay afloat. Social Insecurity for the future funds is not a sure bet though.
Phil Mickelson, professional golfer, age 43. Won approximately 2.2 million dollars in Scotland over the past two weeks, by winning first the Scottish Open, and then British Open. Sounds like a nice haul for two weeks' work.
I'm sure it was discussed here somewhere on FR, that he will be taxed at 60% -- in the UK! This isn't even counting US federal and state taxes he'll pay in California!
You may have heard about the high tax rate in the UK, and what they'll do to professional athletes. Have you also heard about the tax he, and every other athlete also has to pay while in the UK? For those athletes receiving "global endorsement money," they have to pay taxes on that, as well. The compute that tax by taking the total value of their endorsements, and then divide it by the number of days they actually worked in the UK! Outrageous! Mickelson earned something like $44 million in endorsements last year, and has to use that figure as the basis for computing his endorsement tax.
And don't forget, the UK has VAT, property, and all sorts of income taxes. Don't think for one minute that US politicians aren't thinking of ways to tax us more. It's just a matter of time.
" People will oppress each other-- man against man, neighbor against neighbor. The young will rise up against the old, the nobody against the honored."
I’m the same. All self-funded. Almost every company has pulled away from defined pension programs and instead offers some form of accumulation plan. Even FERS has done it though many, including FERS, offer what amounts to a retirement insurance policy that you and I can’t get. We can only get a variable or flat annuity. Both are only for fools. Inflation will eat up a flat annuity and the variable is the same as equities, uncertain.
When I got out of university and hired on in 1978 and went in to HR to sign up in all the benefits I asked about the financial security of the retirement plan and the board of trustees. I got the strangest look from the HR manager. He said nobody had ever asked him that question before.
My FRiend, I am not the least bit sure at all that what we have saved will not be jacked away in theft. I think it will. I think someone will decide you or I have too much and take it away from us. That is where we are headed right now. Pure Communism. There will come a time before we are dead that there will be no private property. We need to be completely realistic, brutally honest about our state of affairs. It is dismal.
Not enough jobs
Not enough people trained or willing to work
Too many just content to make you pay for them to live
Stagnant economy
Over regulated
Over taxed
Destroyed health care program that cost more than normal people can pay
Waste
Fraud
Corruption
Lawlessness in every place you look
and
as a nation we do not know God.
I saw that article. He can offset the UK tax on his US taxes but still has to pay the California tax on his income, his caddys fee, and pay for his transportation etc. It looks like he might pocket 25% of his winnings. I don’t understand why he’s still living in California though. He made a big deal of complaining about the tax rate there earlier this year. The only way to remedy that is to leave.
You know, they may have much more than they can ever spend but it is theirs, they earned it. It is not the government’s or my or your money. It is theirs and nobody has the right to tax it away from them in a disproportionate way compared to what anyone else pays in tax rates.
This is what I believe that will happen, but when? My best estimates are when social security runs out of money, 2033? And, as soon as 2027 unless we dump obamacare.
Please see post #36.
What I want to know is what are you going to do when they just take your personal investments out of your accounts? They will tell you they are going to do it first, you can protest all you want but one day you are going to look and it will be just gone. You’ll be lucky if they leave you an IOU note.
The rule of law is dead. I think it is not going to be resuscitated.
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