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. As a society, we have made trillions of dollars of financial promises to the Baby Boomers, and there is no way that we are going to be able to keep those promises. The money simply is not there.
So writes Michael Snyder (theeconomiccollapseblog.com) in edited excerpts from his original article* entitled The Tip Of The Iceberg Of The Coming Retirement Crisis That Will Shake America To The Core.
[The following article is presented by Lorimer Wilson, editor of www.munKNEE.com and the FREE Market Intelligence Report newsletter (sample here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Snyder goes on to say in further edited (and in some rare cases paraphrased) excerpts:
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. 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…
Many Cities Have Major Unfunded Pension Liabilities
Detroit is far from an isolated case….Other major U.S. cities are facing unfunded pension liabilities that are even worse, for example: Detroit: $3.5 billion; Baltimore: $680 million; Los Angeles: $9.4 billion; Chicago: $19 billion…Many state governments are in similar shape. Right now, the state of Illinois has unfunded pension liabilities that total approximately $100 billion.
Local & State Governments: Unfunded Liabilities of $4.4 Trillion
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.
Where are they going to get that money? They are going to raise your taxes of course…
Your 401k Account is in Jeopardy
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.
American Citizens: $6.6 Trillion Short of Retirement Needs
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.
U.S. Government: $222 Trillion in Unfunded Liabilities
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.,,,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.
The Plight of the Elderly
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?“…
Currently, there are 40 million senior citizens in the United States. By 2050 that number is projected to skyrocket to 89 million.
According to recent polls:
- 25% of all Americans in the 46 to 64-year-old age bracket have no retirement savings at all
- 26% of all Americans in the 46 to 64-year-old age bracket have no personal savings whatsoever,
- 46% of American workers have less than $10,000 saved for retirement,
- 60% of American workers said the total value of their savings and investments is less than $25,000″,
- 50% of all Baby Boomers say that their household financial situations have deteriorated over the past year,
- 67% of all American workers believe that they “are a little or a lot behind schedule on saving for retirement”,
- 17% of elderly Americans lives below the federal poverty line,
- 32% of Americans in the 65 to 69-year-old age bracket were still working in 2010 compared to just 18% in 1985,
- 23% of all American workers plan to retire before they reach the age of 65 compared to 50% in 1991,
- 70% of all American workers expect to continue working once they are “retired”
- 40% of all Baby Boomers plan to work “until they drop”
- 56% of American retirees still had outstanding debts when they retired,
- 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
- 20% of all bankruptcies in the U.S. are by individuals who are 55 years of age or older now compared to only 12% back in 2001, they only accounted for 12 percent of all bankruptcies.
- the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178% between 1991 and 2007, primarily caused by medical bills.
- 60% of personal bankruptcies in the U.S. were caused by medical bills of which approximately 75% involved individuals that actually did have health insurance.
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.
Millions of elderly Americans these days are finding it very difficult to survive on just a Social Security check (the average monthly Social Security benefit for a retired worker was about $1,230 at the beginning of 2012). The truth is that most Social Security checks simply are not large enough…
Sadly, most Americans are not aware of these things. 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.
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
*http://theeconomiccollapseblog.com/archives/the-tip-of-the-iceberg-of-the-coming-retirement-crisis-that-will-shake-america-to-the-core (Copyright © 2013 The Economic Collapse; Michael Snyder is the publisher of The Economic Collapse Blog, The American Dream Blog and The Truth.)
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