From Birch Gold Group
Public pensions are falling apart around the country, but now the security of private pensions is being threatened as well. Based on a new Federal law passed in 2014, the U.S. Department of the Treasury just made a shocking decision to allow a Cleveland-based ironworker pension to start slashing member benefits as early as next month. Now, experts fear other struggling private pensions could quickly follow.
Opening Pandora’s Box on Pensions
It’s always been assumed that both public and private pensions will find a way to fix their shortfalls and pay out their obligated benefits – with public pensions using government cash (from budget cuts and tax hikes), and private pensions relying on corporate profits and cash reserves.
But today’s economy is making those old pension safety nets unfeasible; governments are running out of money, and private sector performance is plummeting.
Now, pensions are starting to consider just how obligated they really are.
Public pensions started bending the rules first, which is less surprising since lawmakers have a personal interest in legislating away plan obligations to avoid gutting government budgets. Private pensions don’t have the same “power behind the throne,” though. They’re legally bound by federal law to pay out their guaranteed benefits.
Well, at least they were legally bound until 2014, when the law changed to allow private pensions to cut benefits upon approval of the Treasury Department.
Now, two years later, the Treasury Department is approving the first request for approval, and critics believe it could trigger a domino effect that strips millions of private pension members of their benefits.
Jonnelle Marte at The Washington Post writes:
…critics of the pension law worry that the cuts may open the door for other troubled pension plans to shrink retirees’ benefits. At least five other pension plans are waiting for the Treasury Department to review their applications to scale back benefits. The proposals could affect tens of thousands of employees and retirees who earned pensions as bricklayers, furniture workers and autoworkers.
“This could just open the flood gates for approval for all of them,” said Karen Ferguson, director of the Pension Rights Center, a nonprofit that focuses on retirement issues.
In essence, what’s happening to pension funds today is bringing the fundamental principle behind their existence into question: that members of the plan can expect a guaranteed level of benefits dependent on how much they pay in, that pensions are obligated to pay out a certain level of benefits.
Pensions are starting down a slippery slope, and it’s impossible to know how far they’ll go.
Where Can Americans Find Security?
It seems as though there aren’t many safe options for retirement in the current economic climate. Public pension holders are at the government’s mercy; private pension holders’ benefits are no longer legally guaranteed, and standard retirement savings accounts are sitting ducks for whatever crisis befalls us next.
For extra security in today’s uncertain financial system, one of the few safe havens left is in the ownership of real assets – savings vehicles with material value that can’t be touched by the government, your employer, or the treacherous currents of the market.
Today, at the same time that many American pension holders are being left frustrated, this may be the perfect time to protect your savings with a market-proven real asset: gold.
Do I hear the rumble of an avalanche?
A math problem for Jim or anyone else.
If I invest $1500 per year into the S&P 500 for 40 years, assuming a historical average return of 10% per year, what would be the total worth of my investment after 40 years?
I come up with $670,000.
At which point it would be worthless.
Thanks Jim. I knew you could figure out a reasonaable answer. Math wasn’t my strong suit.
Go to moneychimp.com, click “calculator.” There, you can run all kinds of different scenarios-annuities, savings, mortgage payments, etc.
Thanks.
I got $800,661.58… good for 23.5 years @$34,000 per year.
Thanks.
Maff is hard, I don’t know. However ,I think I hear a rumble. Damn Maggie ,hope you’re wrong.
“and now they’re coming for your social security money. They want it back; they want it back so they can give it to their criminal friends on Wall Street. And you know something? They’ll get it. They’ll get it all from you. Because they own this fucking place”
……..George Carlin….The American Dream/You Tube. Mandatory viewing if you haven’t seen it.
Some say it was the most important sketch of his life. I apologize if I screwed up the above quote but I tried to put it together from memory.
Maggie,
Yes you heard a rumble of an avalanche. Or maybe the earth’s crust is crunching.
All monies seem to belong to the bankers, one way or another. Bankers & Gov. that is.
There is little comfort in knowing gov drones (human ones) will (maybe) be “first.”
As people realize the monthly few K the pension/SS and savings $ they counted on won’t be
forthcoming? Perhaps there will be anger, but people will be too weak with hunger
to act on it. I run a tight ship, and we have no debt, but I budgeted every which way and
still need just less than 3K to run the house. There are savings, but what will they be worth?
I suspect a middle class household, espec. in the big city requires much more $. Consider
property taxes, for many, are between 8-12K alone. I believe the country is bankrupt,
out of gas, and running on fumes/debt. I am not really an envious or vengeful person.
I really only want “enough” to get by, (not a 2 mo. cruise q year), and I would like to be
left alone! Endless tax/fee grabs, and endless “regulations”/intrusions, do however
create a strong resentment. (q = every)
If the above article is true, that means that a defined contribution pension plan was a fraud all along. You were told that you could only pour in so much money into a defined plan, that was tax deductible.
Any more, and you were not allowed to deduct from your taxes.
So after 40 years, you have a plan that was defined by government decree, and now that you are retired, it is no longer defined.
….I hear the sound of guns coming out of safes around America….
Actually this is nothing new. All pension plans were dreamed up with the forecast of endless 6% + returns for the future. Who would have thought that the American dream would come to ZIRP and eventually NIRP!
Endless positive GDP until the end of time….. Ya right!
That my friends is why the pension dream is just that……..
This article is about “Defined Benefit”, not “Defined Contribution” plans. It’s the Defined Benefit that is being reduced and so you are correct that they were a fraud if that promised benefit is not met.
Defined Contribution plans do not make any guarantees about the final benefit because it will depend on the results of your investment choices (e.g., a 401K plan).
The next step is for the government to get their grubby hands on 401k plans. Don’t think it can happen? Think again. As things continue to deteriorate and pensions continue to crumble, and the welfare state and warfare state look for ways to pay their debts, the trillion dollar 401k will become vulnerable for theft.
Another thing people better be aware of is the wealth redistribution ideology that has really picked up momentum with the wildly popular ascent of Bernie Sanders. I take his ideology very seriously. I have read articles of various lobbyists proposing 401k’s being confiscated and distributed to those without retirement savings in the event of government default and the stopping of government benifits.
We’ve all heard people say that the United States ” will become Greece.” That could very well play out. Things are starting to crash and will only get worse. However, the Greece people should be comparing the U.S. to is ancient Greece. Not modern Greece. I believe Ancient Rome is a much better comparison, though.
The Treasury determining retirement benefits sounds too bad to be true
I thought courts were and still are making that determination
1) This is good news for all who don’t get a pension.
2) If it isn’t in your hand, don’t count on it.
3) By Standard Retirment Savings Accounts, is that 401k?
“It’s always been assumed that both public and private pensions will find a way to fix their shortfalls and pay out their obligated benefits …….”
Assumed by some but not by all.
I’ve always warned against it, and it’s usually been a rather unpopular warning among those that do.
Maybe someone will figure out how to pull off some kind of magical math trick and save things.
Your money, your bet.
Anybody who thinks that the pretty green paper we carry, or the electronic avatars of them we see on our electronic statements of account are not liable to change and/or confiscation at any time are deceiving themselves. All our currency and representations thereof have value only at the convenience of people who do not give a FUCK about you.
There is going to be a big re-set pretty soon now. Not next week, not next month, but long before most of us cease drawing breath. Be ready (somehow) for a life after money, life in a cage for a while. It will not be fun, but it will be interesting and have it’s own dark humor.
Perfect crime, the perfect time
It will be ugly !
And no one will take the blame
Whatever has Caesar’s image on it belongs to Caesar. And he is taking it like he always has. And you too if that is where you have placed your trust.
The only treasure they can’t steal is that which we send ahead by giving to God what has His image on it. His is a great retirement plan. Never forsaken or begging bread now. And eternal love, joy, and peace too.
Blessings:-}