Retirement in Trouble: Underfunded Pension Liabilities Amount to $18,676 for Every Resident of the U.S. Lombardi Letter 2019-11-22 09:09:01 Pension funds across the U.S. economy are severely underfunded. This could create a lot of problems for Americans who are currently enjoying, or are about to enter, retirement. Analysis and Predictions,U.S. Economy

Retirement in Trouble: Underfunded Pension Liabilities Amount to $18,676 for Every Resident of the U.S.

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Retirement In Trouble

Retirement Could Be in Jeopardy for Many Americans

Pension funds across the U.S. are severely underfunded, and this could put the retirements of many in jeopardy. It’s an ignored crisis that could hurt a lot of Americans in the coming years.

Mind you, it’s not just the big pension funds that are putting people’s retirements on the line. Small funds are severely in bad shape as well.


Consider the Los Angeles Unified School District pension fund; it’s underfunded by $15.0 billion. (Source: “Los Angeles Unified School District Unfunded Retiree Health Benefit Liability Nears $15 Billion,” Fox & Hounds, April 17, 2018.)

The Chicago Teachers’ Pension Fund has about $11.0 billion in unfunded liabilities. Last year, this pension fund got some help from the state and the city, but those measures are being debated. So, it wouldn’t be shocking if the hole gets much deeper for the fund in 2018 and beyond. (Source: “Chicago Public Schools’ huge pension debt just got $1 billion deeper, new estimates show,” Chicago Tribune, March 27, 2018.)

Here’s the thing: it’s not just the teachers’ pension fund. There’s also a nightmare situation for other Chicago and Illinois pension funds. The city and state governments are running massive unfunded liabilities, and they don’t have any idea where the money will come from.

$6 Trillion in Unfunded Liabilities at State Pension Funds Alone

Looking at it from a bigger perspective…

According to a report by the American Legislative Exchange Council (ALEC), which surveyed 280 state-administered public pension plans, the unfunded liabilities of state-administered pension funds stand at $6.0 trillion. They have increased by $433.0 billion from 2016. (Source: “Unaccountable and Unaffordable 2017,” American Legislative Exchange Council, last accessed April 18, 2018.)

If this wasn’t enough to convince you that we have a problem, consider this: there are currently unfunded pension liabilities of $18,676 for every resident of the United States.

I can’t stress this enough: this problem isn’t being fixed at all. State governments aren’t putting in enough money to reduce the unfunded liabilities. According to report by Pew Charitable Trusts, in 2015, just 32 states made pension fund contributions that were sufficient enough to reduce their unfunded pension liabilities.

Solutions to Possible Retirement Crisis in the Coming Years

With all this in mind, it has to be asked, where do we go next?

If pension funds continue to have massive unfunded liabilities, eventually someone will have to pay. Will the retirement benefits be cut? It could work for smaller pension funds.

But what happens if this happens to pension funds from major states that have a significant number of retirees?

Dear reader, this may not be the most popular opinion, but it’s very likely that the U.S. government could come in to help the struggling state and city pension funds across the United States. It’s a huge burden on the economy if you jeopardize the retirements of a large number of Americans.

Sadly, if this becomes the case (the U.S. federal government stepping in to help), it opens another can of worms. The U.S. government already doesn’t have enough money to pay for its own expenses. How will it bail out struggling state and municipal pension funds? Probably by borrowing more.

Remember, the U.S. national debt already stands at more than $21.0 trillion. The federal government bailing out pension funds could send it skyrocketing in no time.

The pension crisis in the U.S. is being overlooked when it shouldn’t. Retirement for many Americans could be in trouble in the coming years.

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