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Retirement Crisis in the U.S.: Can’t Even Rely on Social Security Anymore? Lombardi Letter 2021-09-03 07:10:46 retirement US economy social security pensions pension funds There’s a retirement crisis brewing in the U.S. economy, and it could end very badly. It could trigger an economic slowdown, and even an economic crisis. Here’s what Americans should know about it. U.S. Economy https://www.lombardiletter.com/wp-content/uploads/2021/09/stressed-senior-man-in-casual-clothes-sitting-at-t-HB5X5T8-150x150.jpg

Retirement Crisis in the U.S.: Can’t Even Rely on Social Security Anymore?

U.S. Economy - By |
Retirement Crisis

Pension Funds Severely Underfunded

This is not an exaggeration: there’s a retirement crisis brewing in the U.S. economy. It isn’t getting much attention in the mainstream media at the moment because things like stocks and cryptocurrencies are grabbing all the attention, but the longer the problem gets ignored, the bigger the issues are going to be in years ahead.

If you’re saving for retirement, you’ve been warned.

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Over the years, it has become evident that pension funds run by states and cities around the U.S. are severely underfunded. They have amassed immense unfunded liabilities, meaning their assets are smaller than their obligations. The figure isn’t in the millions of dollars; it’s in the trillions, and it’s growing.

You have to wonder what will happen to all the people who have contributed to these pensions for years and, at the time of their retirement, find out that the pension fund can’t pay what they were promised?

Will the U.S. government come in and bail out the pension funds? If yes, how will the bailout be funded? The U.S. national debt stands close to $30.0 trillion already, and bailing out pension funds could cost immense amounts of money.

If you look at corporate America, they’ve been trying to offload their pension liabilities as much as they can. Managing pensions has been costing them a lot. So, workers’ pensions are either moved somewhere else, or the workers aren’t offered retirement incentives at all.

Could Social Security Help Curb the Retirement Crisis?

With all this, one could ask, there’s social security, right?

Well, yes. Social security is there—for now. But could it increase benefit payments to Americans in the coming years to make up the difference for all those who may not be getting paid enough from their pensions?

Here’s the kicker: social security is already fragile, and 2020 took a big toll on it.

The U.S. Social Security Administration just presented a report named The 2021 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds. It provides some eye-opening facts.

Assuming the funding for Social Security by the U.S. government remains the same, the Old-Age, Survivors, and Disability Insurance (OASDI) program will be depleted by 2034, a year earlier than previously projected. Moreover, the Old-Age and Survivors Insurance (OASI) program could be depleted by 2057, eight years earlier than previously projected. (Source: “The 2021 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds,” U.S. Social Security Administration, last accessed September 2, 2021.)

Scary.

Dear reader, in the coming years, it wouldn’t be shocking to see the retirement crisis in the U.S. economy get much bigger—and it won’t end well.

Consider this: what do you think those who are saving for retirement right now will do if they fear that they won’t get what they were promised? All of a sudden, they could really cut their spending and save more of their money. The U.S. economy is highly dependent on consumer spending. If consumer spending goes, the U.S. economy goes.

It’s possible that, over the years, the retirement crisis will drag the U.S. economic growth rate lower. We could see an economic slowdown and a severe economic crisis because of it.

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