I’ve been warning for years (as have many others) that US pension funds, both government- and private-sector, are generally woefully underfunded and unlikely to be able to meet their commitments to their members. My most recent article about it was only eleven days ago.
More than a quarter of a million active and retired truckers and their families could soon see their pension benefits severely cut — even though their pension fund is still years away from running out of money.
Within the next few weeks, the Treasury Department is expected to announce a crucial decision on whether it will approve reductions to one of the country’s largest multi-employer pension plans.
The potential cuts are possible under legislation passed by Congress in 2014 that for the first time allowed financially distressed multi-employer plans to reduce benefits for retirees if it would improve the solvency of the fund. The law weakened federal protections that for more than 40 years shielded one of the last remaining pillars that workers could rely on for financial security in retirement.
. . .
Consumer advocates watching the case say the move could encourage dozens of other pension plans across the country that are facing financial struggles to make similar cuts.
“This is going to be a national crisis for hundreds of thousands, and eventually millions, of retirees and their families,” said Karen Friedman, executive vice president of the Pension Rights Center.
. . .
Ava Miller, 64, and her husband, Ed Northrup, 68, could see their combined monthly pension income cut to about $3,000 from the nearly $7,000 they receive now, according to a letter they received from Central States in October.
There’s more at the link.
This is the first of many such developments. I guarantee it. What’s more, calls for a government bailout of the pension funds have already been made by Bernie Sanders, and will doubtless grow more strident from trades unions and others whose members are threatened by such developments.
The bailouts are fiscally irresponsible and mathematically impossible, of course. There isn’t enough money in the USA – or anywhere else, for that matter – to pay out the ludicrous sums involved. After all, we’ve seen calls for government bailouts of almost anything and everything; from the banks, to pension funds, to insolvent states and cities, to Flint, MI’s water system, and so on. Where will it end? It won’t, according to liberal and progressive political pressure groups. They see the government as the answer to everything and the solution to all problems. The fact that the government can only be that if it takes more and more of our hard-earned money in taxes . . . why should they bother? Most of the people they represent don’t pay taxes! We’re paying for them – and that’s just fine by them!
Meanwhile, if you’re dependent on a pension right now, I very strongly suggest the following.
- Minimize your outflows. Try to economize. Don’t buy fancy new cars or homes, furniture or fripperies. Concentrate on essentials.
- Try to build up a nest-egg in cash to the best of your ability. I’d strongly suggest keeping a few months’ expenditure in cash, at home or somewhere safe, as we’ve discussed earlier. If the government wants to shut down the banks to preserve civil order (or whatever other fancy excuse they come up with), you might be glad of that.
- Look for sources of additional income. I know a growing number of people who are supplementing their income by buying and selling on eBay, Etsy and other such outlets. I know three or four book-lovers who’ve converted their interest into a money-making venture, shopping in thrift stores and garage sales to buy books that are of interest to others, then selling them via Amazon.com for as little as one cent apiece. Amazon allows a standard shipping fee of $3.99, so that means a single sale nets $4.00. After deducting Amazon’s commission and postage costs, they can make $1 to $1.50 per book – and spread over several dozen or several score books each month, even a small operator can make a few hundred dollars every month to supplement other income.
Tough times are ahead, my friends, especially for those relying on pensions. Prepare for them.