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Private pension crisis

From Birch Gold Group

The pension crisis in America is speeding up. We’ve seen several public pensions fail in the past year, and a landmark court decision has allowed public pensions to slash benefits for the first time in history. Now, private pensions are buckling as well.

This isn’t just bad news for pension holders. Anyone’s retirement savings could be affected by these latest developments, young or old.

The First Domino: Public Pensions

After floundering for years, public pensions started collapsing in a big way after our last major crisis.

Since 2008, five major U.S. cities have filed for bankruptcy for their troubled public pension programs. Then in January of this year, the U.S. Treasury granted permission for a public pension to renege on its beneficiary obligations for the first time — based on a new legal precedent set back in 2014.

And that’s just one example of the crumbling public pension system in our country. Bloomberg reports:

State and local pensions across the U.S. have $1.8 trillion less than needed to cover all the benefits owed in the decades ahead, according to Federal Reserve Board data. The need to make up for such shortfalls has contributed to credit-rating cuts to Illinois, New Jersey and Chicago. Such financial pressure has also been acute in California, where it helped bankrupt the cities of Stockton, San Bernardino and Vallejo.

Public pensions are being forced to deal with reality. For a whole host of reasons — some the fault of fund managers, others caused by the market — pensions simply can’t pay out their benefits as promised. The strain of increased beneficiary lifespan, a growing number of beneficiaries overall, and the challenge of investing funds safely and effectively is putting pensions in an impossible position.

Experts say the ripple effect from the pension collapse could touch each and every American, not just pension holders — so much so that one ex-advisor to the Federal Reserve says that the situation makes it “hard to sleep at night.”

But public pensions were just the beginning. Now private pensions are falling too…

Pension Contagion Spreading to the Private Sector

Private pensions have a little more leeway when it comes to managing payouts and keeping themselves solvent, mainly because they have fewer legal obligations than their public counterparts.

But that extra slack isn’t enough to keep private pensions out of trouble anymore. Now the same woes toppling public pensions are causing big problems for private pensions, too.

Major pension cuts by two Fortune 500 companies give us proof.

First, UPS just announced big cuts to its pension program for the next five years. The company will freeze pensions for more than 70,000 of its non-union employees, due to a $70 billion shortfall.

And second, shortly after UPS’s announcement, similar news came out from General Mills. Executives plan to totally freeze the company’s pension plan by 2027.

These two cases confirm a broader trend toward private pension benefit downsizing, outlined in a 2016 research report by Willis Towers Watson. The report shows a big contraction in private pension benefits over the past decade, and it predicts the trend will only grow stronger in the coming years.

This trend is causing big problems for older workers in the private sector, and it’ll only get worse. Plus, it’s intensifying the risks already present from the public pension crisis — a set of risks, which as we’ve discussed before, could easily “snowball” into a larger economic crisis that hurts us all.

Finding Shelter from the Growing Pension Crisis

The instability in private pensions shows that the pension crisis isn’t going to slow down anytime soon. And its impact on Americans is only going to grow more severe.

Whether you’re invested in a pension or not, this is an important time to start protecting your savings.

  • Blankety-Blank

    It’s pretty ironic that even as public and private pensions are threatened, and health care is being eyed for demolition, our honest and sincere public officials have shielded themselves from such hardships by ensuring that their healthcare and retirement is far superior to those people who vote them into place. Ain’t politics grand? Politicians, too.

  • Reality

    The pensions of our legislators, all across the country and at every level of government, should be reviewed. First of all, in states where they get their full salaries in retirement should immediately be stopped and they should receive a percentage of their working salaries JUST LIKE EVERYBODY ELSE!!! Second, in states where they can serve less than enough terms that would keep them in office for less than 10 years and still get a pension should be stopped IMMEDIATELY!!! They should be vested in the job before they are eligible for a pension JUST LIKE EVERYBODY ELSE!!! And third, legislators, both on the job and retired, at every level of government, should pay a monthly medical insurance premium JUST LIKE EVERYBODY ELSE!!! The salaries and bonuses, as well as all the additional perks and benefits of CEOs and top level managers all across the board in every industry, etc. should be reviewed and brought within REASONABLE ranges, and any of them receiving their medical insurance at the expense of the company and not paying a monthly medical insurance premium should be required to do so IMMEDIATELY!!! The ridiculous expenses of providing pensions and medical insurance to those at the very top, in both government and industry, is putting a tremendous strain on the taxes paid by the citizens, and the expenses of the companies all across our country. The GREED of the wealthy in our country has gone through the stratosphere and it is putting a burden on the rest of us!!!

  • landofaaahs

    The interconnectedness of all assets assure that when the collapse comes no place will be safe to hide. Except in Christ.

  • Such waisted rhetoric. Where is the so called government? Heck, there are players on Wall Street bringing home 30% and more per year! Why is it that a government ( whom we all believe to be intelligent and trustworthy ) cannot bring home the bacon ? Anyways ?

  • Margaret

    We really don’t have a government as it was intended to be — and actually was until about the 1970s. The wealthy have made a power grab, and it’s been a spectacular success! Our politicians are in place through the money of outside interests, so almost the whole system is corrupted, even the judiciary. The government is NOT intelligent and trustworthy, it’s being run by crooks who will be very hard if not impossible to get rid of. A depressing state of affairs, and not many safe harbors for average people that I can see.