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 We’ve got some serious pension problems.

We’ve got some serious pension problems.

Pensions are in the news a lot these days, and not for positive reasons.

A Million People Could Lose Their Pensions If Congress Doesn’t Act,” reported The Huff Post recently..

The Coming Pension Crisis Is So Big That It’s A Problem For Everyone,” declared Forbes.

If you have a pension – and are counting on that income to help fund a significant part of your retirement – our conversation today is going to serve as a wake-up call. 

In fact, our country has a huge pension shortfall crisis. This is due to the lack of contribution over the years, lower than expected rate of returns on those contributions, and people living longer. 

Actually, only 18% of the United States workforce has a pension plan, but an estimated 85% of the public employer pension plans in the U.S. are underfunded! 

That leads us to the unavoidable question: where are they going to get the money to pay their pensions? 

Unlike the federal government, they can’t just print more money. Just last year, Congress passed legislation that said pensions from multi-employers, like many with unions, are not guaranteed.

Cities and states can raise taxes and fees. I see that here in Oakland, where they’ve raised parking ticket fees, taxes on investors who want to invest in homes, and even push for a soda tax, just to name a few. Expect taxes, taxes, and more taxes going forward. 

They can also cut back on services. We already see the results of that cutback in services with crumbling bridges, roads with potholes, and city parks not maintained like they once were. Cutbacks in police, fire, and social services are next. 

Another option is to borrow the money. In 2015, the City of Chicago borrowed $1.1 billion dollars to meet the obligations of their pensions. Many experts say it is wasn’t even enough for the city, and they’ll probably have to borrow again. 

The last option for city and states would be one like the “Puerto Rico plan.” When the well is dry and they become insolvent, they’re not able meet the obligations of their debt and pensions. 

Recently, a group of Teamsters found out that their pension was going to be cut. Some of these retired union members will see their pension benefits cut by 51 percent! Can you imagine being 71 years old and finding out that your pension just suddenly was cut in half? How do you bounce back from that? You can’t. 

As most of the baby boomers have not turned retirement age yet, I think cities and states will use this tactic to give their budget a permanent haircut. Am I saying you won’t get any of the money in these pensions? 

No! 

But you will not get the amount you may have hoped for.

Give me a call so we can review your pension, retirement goals, and adjust your planning accordingly.

-Jason Matthews