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A Retirement Crisis Is Brewing, But It Continues to Get Ignored Lombardi Letter 2021-11-17 17:43:29 retirement retirement crisis pension funds pension plans There could a retirement crisis brewing in the U.S. It may not be talked about much, but it could impact the livelihoods of many Americans and even lead to an economic crisis. Here’s the full story. U.S. Economy https://www.lombardiletter.com/wp-content/uploads/2021/03/problem-LQ3C3ES-150x150.jpg

A Retirement Crisis Is Brewing, But It Continues to Get Ignored

U.S. Economy - By |
retirement crisis

Retirement for Many Americans Could Become Awfully Difficult

You probably won’t hear much about it in the mainstream media, but there’s a retirement crisis brewing in the U.S.

It continues to get bigger, and very little attention is given to it. Mark my words, as the retirement crisis gets even bigger, many Americans’ retirements could be on the line.

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These days, the mainstream media seems to be too concerned about what happens with hot stocks, and investors are too busy debating whether cryptocurrencies like Bitcoin are the future. In the midst of all this, don’t overlook what’s happening at pension funds around the U.S.

As it stands, a large number of pension funds are severely underfunded. In other words, they don’t have enough money to pay out the people who have been contributing for the future.

City-run pension funds around the U.S. don’t have enough money. State-run pension funds are struggling. Multiemployer pension funds are at critically low levels.

Imagine what will happen if you’ve been contributing to a major pension plan for years, and when you reach your retirement age, you find out you’ll only get a portion of what you had contributed.

$6-Trillion Pension Gap: Who Will Pay?

Here’s are few numbers that you shouldn’t forget.

In 2018, the 50 state-run pension funds had a funding gap of $1.2 trillion. These pension funds only had 71% of the assets needed to pay their future benefits. (Source: “The State Pension Funding Gap: 2018,” The Pew Charitable Trusts, June 11, 2020.)

There isn’t more recent data available, but it wouldn’t be shocking if pension funds’ unfunded liabilities have grown since then.

Looking from a bird’s-eye view, according to the American Legislative Exchange Council, which looked at more than 290 state-administered public pension plans in recent years, the unfunded liabilities stood at almost $6.0 trillion. (Source: “Unaccountable and Unaffordable 2018,” American Legislative Exchange Council, last accessed March 23, 2021.)

If you look from an even broader perspective, you’ll find that the unfunded liabilities could be a lot bigger.

A Slow-Motion Car Crash

Dear reader, pension funds aren’t a hot topic, so you don’t hear about their problems on a daily basis. However, it doesn’t mean those problems aren’t there.

This may sound significantly pessimistic, but it’s worth mentioning: what’s happening with pension funds now could be a slow-motion car crash. It’s not perceived as an issue now, but it could impact the retirements of many Americans in the coming years. For many people, retirement could be awfully difficult.

In the recent stimulus package from the U.S. government, about $86.0 billion were allocated to multiemployer pension plans. (Source: “Opinion: Critics Leap on Aid to Multiemployer Pension Plans,” MarketWatch, March 23, 2021.)

I see it as nothing but a band-aid solution to a severe injury.

I’ll end with some food for thought: What will happen in the next decade when the unfunded liabilities of pension funds are much bigger and the U.S. government that has been borrowing like there’s no tomorrow can’t bail them out?

Many Americans rely on pension income during their retirements, and seniors are a major consumption force. Wouldn’t it hurt the U.S. economy if retirees don’t get all the pension money they were expecting?

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