The Beginning Of The End
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Broken Promises: Pensions All Over America Are Being Savagely Cut Or Are Vanishing Completely

How would you feel if you worked for a state or local government for 20 or 30 years only to have your pension slashed dramatically or taken away entirely?  Well, this exact scenario is playing out from coast to coast and in the years ahead millions of elderly Americans are going to be affected by broken promises and vanishing pensions.  In the old days, things were much different.  You would get hired by a big company or a government institution and you knew that the retirement benefits that they were promising you would be there when you retired in a few decades.  Unfortunately, we have now arrived at a time when government institutions and big companies have promised far more than they are able to deliver, and "pension reform" has become one of the hot button issues all over the nation.  Many Americans that have been basing their financial futures on their pensions are waking up one day and finding that their pensions are either gone or have been cut back dramatically.  According to Northwestern University Professor John Rauh, the latest estimate of the total amount of unfunded pension and healthcare obligations for state and local governments across the United States is 4.4 trillion dollars.  America is continually becoming a poorer nation and all of that money is simply not going to magically materialize somehow.  So where is that 4.4 trillion dollars going to come from?  Well, either pension benefits are going to have to be cut a lot more all over America or taxes will need to be raised dramatically.  Either way, we are all going to feel the pain of these broken promises.

There simply is not enough money out there to keep all of the pension commitments that have been made.  Something has got to give.  In the end, millions of elderly Americans will likely be plunged into poverty as pensions disappear.

Some local governments around the nation are already declaring bankruptcy and are either eliminating pensions or are cutting them very deeply.  Just check out what just happened in Central Falls, Rhode Island....

For years, city officials promised robust union contracts and pensions without raising revenue to pay for them. Last August, the math caught up with them. Central Falls was broke, its pension fund short $46 million. It declared bankruptcy.

"My daughters grew up here, went to school here. It's all gone," said Mike Geoffroy, a retired firefighter.

He said he could not make the payments on his house after his pension was cut by $1,100 a month.

When will the math catch up with the city where you are living?

For years and years most of our state and local politicians have been ignoring this problem.  But eventually a day comes when you simply cannot ignore it any longer.

Check out what Pensacola Mayor Ashton Hayward said about the situation in his city recently....

"When our annual pension liability is more than our yearly property tax revenues, we have to do something"

Keep in mind that taxpayers don't get any new services for money spent on pensions.  It is money that goes straight into the pockets of retired workers.  State and local governments are desperately trying to pay retired workers what they are owed and fund ongoing government functions at the same time, but many have reached the breaking point.

All over the country, state and local governments are going broke.  The following is from a recent article by Duff McDonald....

Alabama's Jefferson County has actually gone bankrupt. Stockton, California is all but ready to do the same. And all you have to do is look to Detroit—or any of the nearby auto towns named after a Buick model of one sort or another—and you see fiscal crisis playing out right now. Look in your own backyard—or at the potholes on your neighborhood roads—and you will likely find the same.

Things are so bad in Stockton, California that they are actually skipping debt payments....

The city of 290,000 that rode the wave of the housing boom in the late 1990s and early 2000s now finds itself littered with foreclosed homes, saddled with pension, health care and other obligations it can't afford, and unable to pay its bills.

The City Council voted last month to suspend $2 million in bond payments and begin negotiations with bond holders, creditors and unions.

And did you notice what is being blamed for the financial problems in Stockton?

Pension and healthcare benefits.

Sadly, we are seeing pension nightmares erupt all over the nation right now.

For example, check out what is happening to the Public School Employees' Retirement System and State Employees' Retirement System in Pennsylvania....

PSERS had an accrued unfunded liability of nearly $26.5 billion, the amount of money the fund is short to cover existing retirement benefits. That hole is expected to grow to $43 billion by 2019. SERS is $12.5 billion in the red, and that shortfall is expected to climb to nearly $18 billion by 2018. Unless the stock market makes giant sustained gains, taxpayers will have to refill those funds.

That doesn't sound good at all.

In California, the Orange County Employees Retirement System is estimated to have a 10 billion dollar unfunded pension liability.

How in the world can a single county be facing a 10 billion dollar hole?

This is madness.

The state of Illinois is facing an unfunded pension liability of more than 77 billion dollars.  Considering the fact that the state of Illinois is flat broke and on the verge of default, it is inevitable that a lot of those pension obligations will never be paid.

In fact, there are going to be a whole lot of broken promises all over the country.

Pension consultant Girard Miller told California's Little Hoover Commission that state and local government bodies in the state of California have $325 billion in combined unfunded pension liabilities.

That comes to about $22,000 for every single working adult in the state of California.

So where is all of that money going to come from?

But at least most state and local government employees are still covered by pension plans, even if they are failing.

In the private sector, pension plans are vanishing at lightning speed.

According to the Boston College Center for Retirement Research, the percentage of workers in America covered by a traditional pension plan fell from 62 percent in 1983 to 17 percent in 2007.

That isn't just a trend.

That is a tidal wave.

And many of the private pension plans that still exist are massively underfunded.  For example, Verizon's pension plan is underfunded by 3.4 billion dollars.

So what should Americans do in light of all this?

Well, the number one thing to realize is that the pension plan you have been counting on could disappear at any time.

We live in an economic environment that is extremely unstable, and about the only thing you can count on in this environment is rapid and dramatic change.

Do not plan your financial future around a pension plan.  If you do, you are likely to be bitterly disappointed.

Americans that plan to retire in the coming years should do their best to try to fund their own retirements.

Unfortunately, most Americans are not putting away much of anything for retirement.  As I have written about previously, one study found that American workers are $6.6 trillion short of what they need to retire comfortably.


Over the next 20 years approximately 10,000 Baby Boomers will be retiring every single day.

A lot of them are going to be blindsided by empty pension funds and broken promises.

We are facing a retirement crisis of unprecedented magnitude, and there is not much hope in sight.

And if there is a major stock market crash, things are going to be much, much worse.

Most pension funds and retirement plans are heavily invested in the stock market.  If we were to see a major financial crisis like we saw back in 2008 it would be absolutely devastating.  Millions of Americans could see their retirement plans wiped out in short order.

Once again, please do not place your faith in the system.

If you do, you are likely to end up holding a bag of broken promises.

A gigantic tsunami of unfunded pension obligations is coming.  A lot of state and local governments are going to go broke.  A lot of promises are going to be broken.

If you hope to retire any time soon, you better plan on being able to take care of yourself.

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  • Lennie Pike

    It’s my guess that people like him will be the only ones pointing the guns – that is only after they’ve taken control, and I’m sure they will use them as Stalin, Mao, etc. did.

    A control freak mentality due to fear is the reason they’re the way they are, and the fear exists due to no presence of God in their lives. It is a scary world when one is not for God but against Him.


    Gary 2, you don’t seem to know much about history. Most of this current mess can be traced back to Lyndon Johnson’s Great Society. You think maybe he was a right-wing Republican? But, no matter! If you tax the rich to pay the 4.4 trillion, they will close the factories and there will be civil war. If we stay the course and the boomers lose their pensions, there will be civil war. If we let Bernanke keep printing money till we resemble the Weimar Republic, there will be civil war. There is an ugly mood growing across the country. The “Have-Nots” are seething with barely controlled anger. They have seethed before so no big deal. But, wait till they get hungry. Enjoy the peace because the war is gonna be hell!

    • Gary2

      The “Have-Nots” are seething with barely controlled anger.

      You are absolutly correct about the have nots and the never wills

  • Newton

    I fail to see what it is people expect to recieve from other people who are placed in one way or the other ; in a position of power.

    These very people who have obtained power; from the very beginning of our country have abused it and every generation after has been one of more greed, more corruption and hypocrisy.

    To the point where now; it is quite normal to stand before 300 Million people and tell them lie after lie after lie – because you can.

    ” The Earth was created by the assistance of the Sun, and it should be left as it was, The country was made with no lines of demarcation,
    and it’s no mans business to divide it. I see whites all over this country gaining great wealth, just as I see the desire to give us lands that are worthless.

    Oh yeah; we started out liars and cheats and thieves and fornicators back when our country was just beginning. But then; we had good teachers didn’t we ?

    Chief Joseph was just a dog to be whipped into position by first General Howard and then General Miles.

    That was 1867

    Nothing has changed


  • DL

    We get what we deserve.

  • Bruce

    How would you feel if you knew that the state and federal workers who were to recieve those pensions voted to send the jobs to China of people who’s tax base would help fund their pensions….It was very dumb to send our industrial base to china…But I think it’s funny to see it affect people who said it was ok since they thought the Giant sucking sound wouldn’t affect them

  • tappedops

    +1 Aaron…

    ya sure i got killed by the takeover… but i snapped back, found a full time middle -class job ( 30 hours a week @ 11.50 an hour)… i ride a 500 dollar bike and the slaves could only wish they could be me… livin large on well over 1 grand a month… eat your hearts out… lol

  • S. Wiseman

    Why Government Doesn’t Work, by Harry Browne…

    “One need not be an anarchist (vague or otherwise) to recognize the obvious — that government doesn’t work. It doesn’t deliver the mail on time, keep the cities safe, or educate our children properly. Its War on Poverty and its War on Drugs are massive failures. Millions of Americans have lost faith in government precisely because governments everywhere have reached the inevitable stage where nothing about them works as promised.”

    “Government can help the health-care system only by getting out of it. It has no more ability to make us well than it does to make us rich.”

    “Learning, as measured by Scholastic Aptitude Test (SAT) scores, steadily declined throughout the 1960s and 1970s. [I attribute this to] the federal government’s heavy hand transforming the public schools and the private schools as they became dependent on it. Yesterday’s schools focused on reading, writing, arithmetic, history, and geography. Today’s schools spend much more time teaching children:
    To be citizens of the world
    To be sensitive to people who are different than themselves
    To pester their parents to recycle cans and bottles
    To understand how western civilization destroyed a peaceful North American continent
    To report their parents if they catch them using drugs; To practice safe sex.”

    “The crusade against victimless crimes reaches the apex of absurdity in the War on Drugs. It is the quintessential example that government doesn’t work. Government has failed completely to stop people from taking drugs. It can’t stop drugs from coming into the country. It can’t even stop drugs from getting into its own prisons.”

    “Federal laws interfere with local police work and violate the Constitution. They also allow government to circumvent the Bill of Rights and subject citizens to double jeopardy. If a jury acquits someone of violating a state gun-control law, for example, he can be re-tried for violating a federal gun-control law-even though the second trial is for the same act.
    The federal government has no special wisdom, no special authority, and no special ability to fight crime. The Founding Fathers thought that would be a terrible idea. The past 35 years have confirmed their wisdom. The federal government’s involvement in local law-enforcement has helped the guilty and hurt the innocent.”

    “The Social Security tax has risen from a combined employer-employee rate of 2% in 1935 to today’s combined tax of 15.3%. And there’s no reason to believe the tax rate won’t continue to rise. As administered by politicians, Social Security is inherently unworkable, because the politicians always spend the money they take in. As the retired population grows, it requires higher taxes to pay the benefits the politicians have promised.”
    Medicare has caused higher health costs; Constitution gives people freedom FROM government”

    “Great Society: federal takeover of ed., welfare, crime. By taking control away from communities, the federal government made schools, police, and welfare systems even more remote from the people who pay for them and rely upon them; the 1992 Health Plan is all about coercion, not compassion. There are some revealing terms in the proposal–such as prison (which shows up 7 times), penalty (111 times), fine (6), enforce (83), prohibit (47), mandatory (24), limit (231), obligation (51), require (901), and so on. No matter what they say, neither the Democrats nor Republicans want to give up the power that allows them to bestow favors and exemptions on friends.”

    “Our salvation won’t come from politicians.”
    The above quotations are from Why Government Doesn’t Work, by Harry Browne.
    Available as a free download in PDF format free online.

  • Fester

    What can I say,

    Corporate – Fascist Use –

    Darwinian Selected…





    And have ruined OUR Country.

    Wake up…Turn-on, or check your hearing aid…The Fat Lady is Singing.

    • Lennie Pike

      That is so true – look at “our” politicians and at who offers them up to us for “consideration as “our” leaders.”

      It’s on record that Goldman Sachs has, and probably still is, recruiting psychopaths as employees because it’s a proven fact that they produce higher profits for the company than non-psychopaths.

  • RJ

    We promised the world to our Gen Pop in the mid 1960s. Much of it was wonderfully optimistic and appropriate, but its legacy has run a muck. In the last 50 years we have devolved into an extremely entitled society, one in which our founding qualities of individualism and self-responsibility have become mere shadows of themselves.

    In Stockton’s case, it has been reported that “after working for just 30 days for the city, an individual could retire with free medical for themselves and their family, for life…”
    Huh????? Really….

    I am so very tired of the Moral Hazard we have created in our society. It will destroy us! Two of my neighbors have told me that “they are letting their houses go because hey, why should they pay for a house that will never be the cash generating vehicle that they thought it would be…” Gee I hadn’t realized you weren’t vested in the neighborhood and were just ‘passing thru’.

    So with all the “freebies” that shouldn’t have been, and people being given credit availability that they did not warrant, I am left asking; When did “your” poor decisions and selfishness become “our” problem?

    I and approximately 30% of the country who conducted ourselves responsibly appear to be fools for playing by the rules. I guess hopefully I will be let off at St. Peter’s and not a truck stop…

  • BK

    Consider this: Likely that State Courts will hold the broken pensions as a forced TAX OBLIGATION on state residents.

    The results will be taxpayers fleeing Illinois, and California, and many other states.

    Did you see that of the 10,000,000 new residents of California from 1985-2005, 7 mm are on public assistance, and only 150,000 are taxpayers! 1.5%

    • John W.

      Those ten million new Calif. residents are mostly immigrants legal and illegal. The two party sham has destroyed the tax base of the country and then saddled it with millions of immigrants who will never be able to pay their own way. They have their benefits waiting for them along with a Democrat voting registration the minute the arrive. In Long Beach there is a store front in a mall where the newly arrived illegal is taught how to get all the free stuff. Suckers!

  • Patriot Alice

    A pension was never part of my future..Private sector blues…

  • comnenus

    There is going to be NO retirement crunch. I guarantee it.

    Very simple. Old people who can’t pay the medical bills will probably die. Once they die, no more retirement money will be spent on him or her.

    Soviet Union didn’t really had to worry about retirement crisis until the youngsters of WWII grew old, and that’s when the bigwigs at Moscow got rid of USSR to stiff the red army pensioners.

  • George

    Defined benefit pension plans have a major flaw that will ultimately render many insolvent. The flaw is the “expected rate of return” on the pension fund’s portfolio of investments. The expected rate of return for the past decade has been set by pension fund managers at 7.75% to 8%. For the past decade the actual rate of return annually(for government pension plans) has been 3%. While that might not seem a huge difference, it equates to a 5% compounded Annual Loss each year.

    So,as an example, let’s assume a very healthy government pension fund was 100% funded in 2001. Then let’s look 10 years later. For each $1000 in original pension assets, there was actually, on average, only $1344 at the end of the 10 year period, which is a 3% compounded return. But, to meet its funding obligations, the pension fund needed $2159 at the end of the 10 year period, which is 8% compounded. In this example,the pension fund has, over ten years, “lost” over $800. Now the pension fund, which was fully funded just a decade ago, is only 62% funded (a loss of 38% in expected value in 2011)because return on investment expectations were not met.

    It is highly unlikely our hypothetical pension fund can ever earn a return of 8% or more over the next decade. More likely,it will be around 3% again. If so, the “loss” by 2021 will be $2850 and the plan will be 39% funded. The total compounded “loss” to the pension fund over two decades is a shocking 61%!

    The math indicates that some pension promises will not be kept.

    • Michael

      Very good comment.


    • Gary2

      hard to argue with your logic. good post!

  • John S

    How will I feel if I spent a career in government and my pension disappeared? Pretty much the same as I feel now in the private sector. I was last offered a pension 10 jobs ago in the 1970s. And that pension vaporized 15 years later when the firm was bought by a French conglomerate.

  • steve2222

    What crock of bull. Google CAFR which is the report of total income in each government agency. All they tell is the budget. That is like you spend $60,000 but are making $100,000 per year. There is so much hidden money out there that all pensions can be paid for and no one would have to pay taxes. Don’t believe google and learn. If your losing your pension, get the info, and force them to cough up.

  • Anastasia

    Michael, thank you for your articles!
    You are a watchtower &
    I appreciate all the time you put
    into researching and writing
    for the benefit of others.
    For the benefit of me, and my family.
    Your sister in Christ, Anastasia

    • Michael


      It is great to hear from another Christian. May you and all of the other readers have an incredibly blessed week. :)


  • mondobeyondo

    I read this article on CNN (Calamari News Network) the other day, and could hardly believe it.

    1.5 million people in the United States of America, living on $2.00 a day.

    Let that sink in for a moment.

    1.5 million people in the United States of America. Living on $2.00 a day.

    How is this possible, in the wealthiest country in the world?!? That is a Third World stat. People in Kenya survive on $2.00 a day. Indonesia. India. Madagascar.

    Not the United States of America.

    This is just extremely hard to comprehend. I’m among the fortunate – I have enough money to purchase food to eat. The parking lots at Red Lobster are full on Friday and Saturday nights. Yet many people don’t have two pinto beans to rub together.

    Is this true?? Or just media propaganda?* Incomprehensible to think people living in a world superpower are starving to death! Is that so? Is that what you say? Millions upon millions of people starved to death in Josef Stalin’s Russia, and Russia was a superpower at the time.
    *Yes, it’s true. I live here. I see the lines outside of the food banks – the “front lines”, so to speak. It’s true.

    Send a presidential candidate to St. Mary’s Food Bank here in Phoenix. I dare them to deny the evidence in front of their faces.

  • Johnny

    Take an hour or two and research this. America was founded upon Biblical Law. It was in every State Constitution at the start of this country. Biblical Law was held in the highest regard, this is undeniable. Look at where we are now, a huge mess that no man can fix. Our churches teach that Biblical Law has been done away with-a lie!

  • ALJO

    Greed, envy, short-sightedness, a need for immediate gratification, a lack of spiritual perspective and understanding have led us to the abyss, to the edge of very painful lessons.

    But these lessons will lead us to great insights into the real meaning of life. And these will not include 2 car garages so full of stuff that we cannot even park a single vehicle in them.

  • JoniJ

    FOREIGN AID…I’m just sayin’. Y not make it DOMESTIC AID and stop raping American citizens!

  • dieshard

    STOP foreign aid !!! Two wars have screwed the public !! Just think IF those BILLIONS spent overseas had been spent here ????

  • Doug

    You people all miss the point. It’s the fault of our corporate controlled news media. Listen to Wolf Blitzer make the case for yet another war in Iran at the behest of Israel. I was actually relieved to see the Russians move troops into Syria. It’s my hope that the Chinese will move into Iran in an effort to keep world war 3 from being started by the Israelis and the US government. I do agree with the comment on CAFR though. There is a LOT of hidden money out there and it’s not being reported.

  • Cookie Munster

    Who ever had part in the gross mismanagement and lack of security of all pension funds promised for the foreseeable future should be jailed as these promised and relied upon funds are sacred and should have been treated as such..It has been well known for decades the amount of people who had no idea that their retirement funds were at risk at all….IMPORTANT FUNDS LINKED TO RETIREMENT ACCOUNTS WERE SPENT AND PUT AT RISK WHEN THEY SHOULD NOT HAVE BEEN…HEADS SHOULD ROLL AND SOME SOLUTION TO DO AS PROMISED MUST BE MADE. How can they justify paying huge salaries/bonuses and expense accounts to the Exec’s without them coming up with a plan to have the company be successful and the retirees secure….Maybe this is what they’re mandate was unfortunately. Coming up with a self created crisis will do it. Crush the average citizen..How sad..I do believe that every Dog will have their day !

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