Posted on 06/22/2021 8:20:44 PM PDT by SeekAndFind
A few years ago, my father passed away…
He was a brilliant physician… but unlike most surgeons, he didn’t have a lucrative private practice to support him in retirement. He was a professor at the University of North Carolina-Chapel Hill… a state employee.
And his wife, my stepmother – whom I’ve known and loved for more than 30 years – depends on the survivorship benefits from his pension. The problem was, that pension was hanging by a thread.
I’ve seen headlines for years about a “pension crisis” (as I’m sure you have too) and read occasional notes about small towns going bankrupt. I figured the pension problems were just fearmongering… or something that a little bailout from the federal government could fix.
I was wrong.
When I dug into the numbers, I discovered that at the time, North Carolina’s state-sponsored pension funds were only 51.3% funded, right on the edge of the crisis point. It made me furious.
The more I dug, the more I realized how much danger was facing my stepmother and millions of other retirees…
Nothing beats a government pension. If you (or a loved one) work for the government, you expect pension benefits to support you for the rest of your life.
If you’re already retired, your check has shown up without fail, month after month. Your health care benefits are far better than most. And your money is practically inflation-proof, thanks to your cost-of-living adjustments.
Anyone would love to be promised those benefits in retirement. But what if that promise isn’t kept? What if you work for decades… only to have a big part of your promised compensation taken away from you?
This isn’t a hypothetical. It’s happening. And it’s going to happen to more folks soon.
Public pensions nationwide are crumbling. Legal loopholes are widening. If you don’t take action to protect yourself and your loved ones, you could be left with nothing.
If you’re currently retired, the coming American pension crisis could mean the elimination of cost-of-living adjustments, higher health care premiums, or even cuts to your base pension check. If things are bad enough, you may suffer a ravaging “clawback” – where the government repossesses a huge lump sum of your cash – and still cuts your monthly check.
Again, this is not a hypothetical.
In 2001, the vast majority of pensions were fully funded. Generally speaking, “well-funded” means above 80%. But 50% funding or less is considered the “crisis point.” It’s extremely difficult to come back from 50% or less.
According to The Pew Charitable Trusts – an independent research organization – pensions in Connecticut, Illinois, Kentucky, and New Jersey are less than 50% funded. In fact, New Jersey sits at the bottom of the list… Its pension is only 38% funded.
Only seven states are 90% funded.
If you’re one of the tens of millions of affected Americans, you should know… you have zero control over what happens.
You can’t increase or decrease the amount that’s being invested. Also, companies hire managers who oversee where the pension money goes… And the fees they charge dilute returns.
Plus, if you die right after you retire, your dependents might get nothing.
But there is a solution…
You can move money from your pension into a self-directed individual retirement account (“IRA”).
This gives you total control of your money. You get to grow your money tax-free, just like a pension… but there’s no limit on how much you can make.
A self-directed IRA is exactly what it sounds like… It puts you in charge of your investments.
In addition to the conventional investments you can make in a typical IRA – like stocks and bonds – a fully self-directed IRA allows you to invest in many other assets, including real estate, private stocks, businesses, options, and even precious metals.
You can invest in just about anything, as long as it’s not employed for your personal benefit. This simply means you must avoid any conflicts of interest. You can’t, for example, invest in companies you have a 50% interest in. But you can buy the house next door through your IRA and then rent it to a neighbor. You can also invest in a local small business (again, as long as it’s not your own).
If you do all your trading inside a retirement account, you don’t have to report any trades to the IRS. The goal is simply to maximize your total returns as quickly and as easily as you can… and get better returns than a pension could offer.
There are two ways to move your pension to an IRA…
One is to “roll over” the pension directly into an IRA. The broker or custodian you’re opening an IRA with should have all the necessary forms for you to fill out.
You can also take a lump-sum payment on your pension and then move the funds into an IRA. If you do transfer the funds within 60 days of taking the lump sum, you’ll avoid being taxed on the money and the 10% early withdrawal penalty. (If you can, though, just roll over the pension directly – you don’t want to risk incurring taxes and penalties at all.)
And make sure that you check with your employer’s pension-plan rules for any fine print.
However you do it, don’t wait. Why leave your pension – the money you’re counting on for retirement – in someone else’s hands?
Here’s to our health, wealth, and a great retirement,
— Dr. David Eifrig
It’s almost like our whole economic system is like a house of cards and could collapse with a series of dumb moves by Democrats.
Sadly, many people who retire with pensions have been content to put their lives in the hands of others, government, unions, et cetera. They are ill prepared to take their lives and savings into their own hands.
I want every Freeper to receive their pension. But then I want 40% of all government workers fired.
For generations, politicians have stayed in power by making promises that they left the next generation to pay for.
IRAs, 401ks and so on will be confiscated soon and all the money will be replaced by IOUs from the Treasury. It’s coming.
This conceivably makes sense depending on the discount in calculating your lump sum disbursement. If many people do it, however, it will only make the pension plan go broke sooner.
It also assumes you can outperform the investment professionals managing the pension's funds.
Don’t worry, Fed.gov with its unlimited debt in printed Federal Reserve dollars will make everyone whole.
“I want every Freeper to receive their pension. But then I want 40% of all government workers fired.”
***********************************************************
Well, likely the “front line” employees would be missed but the massive “back office” army of bureaucrats would not be missed if reduced by 40%.
It’s important to keep an eye on things such as how well your pension fund is managed and whether it is sufficiently funded.
My husband retired in 1997, and I have on occasion run the numbers to see if a lump sum invested in the S&P 500 would have been a better deal. No - it would not have been.
It makes more sense to me, to save and invest extra money so that you don’t have all your eggs in one basket. And I would also prefer actual possession of assets such as gold and silver - many of those precious metal IRAs are on paper, but you don’t have the actual item in your possession.
Taking a lump sum is an option to be considered carefully, and also requires that you have the knowledge to manage such a portfolio.
So take some money and invest it while you are still working and see how you do-before your decision has to be made. JMHO.
RE: It also assumes you can outperform the investment professionals managing the pension’s funds.
If these investment professionals are so good, how come most of these funds are in crisis?
Taxpayers will get stuck making them whole
I’m pretty sure that all judges have their own pensions.
Many of these investment professionals got the state or local account by giving kickbacks to government officials, so that is the key skill they needed.
They probably are better at that than most other folks. :-)
Because the contributions aren’t large enough.
It’s the same problem with private pensions.
Taxpayers and shareholders don’t want to pay in what’s required so they make unrealistic assumptions about what the investment returns will be.
In general the problem isn’t poor returns, it’s inadequate capital.
Just wait for the hyperinflation to hit in full.
As long as a taxpayer has two pennies to rub together there are two the government can take.
Do you have a real job?
Do you speak any of the three main dialects...in China?
Why is it you post so much?????
You've said you aren't from here....
Cap all government retirement disbursements to $30k/yr. Stick it to the management.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.