The pension crisis our country faces is spreading to cities and states at a rapid pace. This will potentially impact the retirement of millions of Americans.
Pension funds across the United States are underfunded. This is when a pension fund has payments to make but not enough money coming in to make those payments. As a whole, public pension funds are underfunded by more than $5.0 trillion! (Source: “Are State And Local Government Pensions Underfunded By $5 Trillion?,” Forbes, July 1, 2016.)
Some Areas Hit Extra Hard
Some pockets of the crisis are worse than others. The pension crisis in California is severe, with state and local government pensions underfunded by $241.3 billion. (Source: “Understanding California’s public pension debt,” Los Angeles Times, September 18, 2016.)
The Dallas Police and Fire pension fund made headlines recently, with the revelation that it is underfunded by $3.7 billion. This has created a sort of financial crisis for the city. (Source: “Government to the rescue in Texas? That rarity could solve Dallas’ failing police pension,” Dallas News, March 17, 2017.)
Record low interest rates since the credit crisis of 2008 have decimated public and private pension funds.
The City of Chicago has two large pension funds that paid out $999.0 million to retirees in 2015, but the funds only generated $90.0 million from investments! (Source: “$999 million out, $90 million in: Chicago pension funds see the abyss, shrug it off,” Chicago City Wire, March 27, 2017.)
Will Anyone Stop the Pension Crisis?
Who’s ultimately on the line with this pension crisis?
At one point, under former President Barack Obama and the Democrats, my assumption was that the federal government would step in to help the situation. Now, under President Donald Trump and the Republicans, I’m not so sure a pension bailout will happen.
The U.S. national debt already stands at $20.0 trillion. With President Trump’s plans to increase spending on infrastructure and defense, while trying to cut the taxes of Americans, I can’t see the federal government jumping in to save the day on the pension crisis anytime soon.
More Than One Financial Crisis in the Works
While the pension crisis isn’t a debt crisis, it is a black hole that desperately needs money. Add to it the student debt bubble and the auto loan bubble, and we have several developing financial catastrophes happening at once. All of this will ultimately be negative for the U.S. dollar and positive for precious metals. Investors with long-term portfolio plans should act accordingly.