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Brewing Retirement Crisis Could Cause Next U.S. Economic Collapse Lombardi Letter 2019-10-17 09:36:21 There’s a retirement crisis brewing in the United States that might be so serious that it could cause an outright economic collapse. It’s something that shouldn’t be ignored. U.S. Economy https://www.lombardiletter.com/wp-content/uploads/2019/10/iStock-1005984010-150x150.jpg

Brewing Retirement Crisis Could Cause Next U.S. Economic Collapse

U.S. Economy - By |
Brewing Retirement Crisis Could Cause Next U.S. Economic Collapse

iStock.com/Nuthawut Somsuk

Retirement Crisis in the Making, U.S. Economic Collapse Next?

You won’t hear much about it anywhere, but know that there’s a retirement crisis brewing in the United States. No matter how you look at it, this won’t end well. Mark my words: it could cause the next economic collapse.

What’s the root of the problem?

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You see, Americans don’t have enough money saved up for their retirement years, and the current economic environment isn’t helping them either. All odds are stacked against them. When they retire, how will they pay for the things they need and want?

Let’s dig a little bit into the details.

One way that Americans save for their retirement is by contributing to pensions. But there are problems there. Americans may have saved, but they may not get all the pension benefits that were promised to them.

Corporate America has been cutting or freezing pension benefits for employees.

Just recently, there was news that General Electric Company (NYSE:GE), in order to reduce its costs, is freezing benefits for over 20,000 of its employees! (Source: “ GE to freeze pension plans for about 20,000 U.S. workers to cut debt,” Financial Post, October 7, 2019.)

But General Electric isn’t the only company doing this. Major American companies like Boeing Co (NYSE:BA), FedEx Corporation (NYSE:FDX), and Lockheed Martin Corporation (NYSE:LMT) have done something similar to their pension benefits.

Adding more to the misery…

Look at the pension funds at the city and state levels across the country. They are severely underfunded; they don’t have enough assets to pay off their obligations.

According to the American Legislative Exchange Council (ALEC), at the state level, pension funds on average are funded at just 35%. Their unfunded liabilities amount to almost $6.0 trillion. (Source: “State Pension Unfunded Liabilities Nearly $6 Trillion,” Chief Investment Officer, March 29, 2019.)

The underfunded liabilities figure gets much bigger if you include municipal pension funds as well.

Two Possible Scenarios

Dear reader, here’s the issue: How long could this continue?

If pension funds remain underfunded across the board, what will happen to those who are retiring? The pension funds may not have enough money to pay them. And this is exactly why I call it a brewing retirement crisis.

I see two possible scenarios playing out, with all that’s happening regarding the retirement crisis. And none of them look good.

  1. The U.S. government and the Federal Reserve jump in to end the retirement crisis.

How so? They could bail out pension funds by giving them money, just like they did during and after the financial crisis of 2008–2009. Problem: the U.S. government already has a lot of debt and it might have to borrow tons more. This would hurt the U.S. dollar and ultimately hurt the buying power of Americans. Instead of helping Americans, this could cause more misery.

  1. Nothing gets done about the retirement crisis.

This would be devastating for Americans.

You really think Americans will spend any money if they find that there’s nothing left for them when they retire? They will stop spending, and this could cause a severe economic collapse. Never forget this: American consumers are the backbone of the economy; without them, the U.S. economy won’t go far.

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