Retirees Face Huge Problem

Now that the drama of the Fed is all but digested, let's focus in on the effects of all this financial chicanery.  Absent sound money, the fiat system is mis-pricing risks everywhere, asset allocations are all off and predicting the future revenue streams based on a zero interest market is pure speculation, fraught with extreme danger for those counting upon stability in the long term.  Like retirees, for instance.
 
Call me chicken little, fine.  But, the proverbial writing on the wall is now shining brightly, flashing its warning to all who will listen.
 
That problem, is of course, pensions, and their impossibly optimistic assumptions that retirees hope will lead them to receive monthly paychecks in the future.  This story is on Zerohedge, obviously, here, and has also reached the mainstream media, see here for example.  Another Zerohedge post has a striking chart, here.  There are those who may not prefer their news from the internet, or from sites like Zerohedge, but I go there because the writing is timely, detailed, prolific and as to this problem I see coming full-steam ahead, Zerohedge is way out in front in their reporting of it.  Whatever you do, get knowledge from any source and think for yourself.
 
Read the comments after the Zrohedge articles, too.  There is one comment that talks of “State Constitutions” that guarantee those pensions.  While the State Constitutions MAY INDEED purport to guarantee those pension payments, those guarantees are now being tested in the federal bankruptcy courts.  
 
We have reached the end of the can-kicking stage when the bankruptcy courts are called upon to address state sovereign debt issues relative to the federal bankruptcy code, and which dispute over interpretation may trigger a Constitutional decision based on the 10th Amendment.  This is as serious as it gets, and anyone who is focused short term is missing the point.
 
For those formerly residing in the good ol’ USA, and who think that they are retired, living abroad, cheaply, say in Costa Rica, or some other tropical Central American country, and doing so legally in that country on a pensioneer visa, well, those folks best be paying attention.
 
What happens when–not if–but when, the dollar either hyperinflates, or the pension payments shrink or cease altogether?  Can’t happen, you say?
 
Ask those hard working retirees from Detroit, or San Bernardino, or any of the soon to be other major cities’ pensioneers who have worked hard, saved, retired, and now live off their govt-funded pensions whether they can make ends meet with reduced or eliminated monthly checks.  How is it fair to them?  They did nothing wrong.  Their work was done, they fulfilled their promises, and now those elected officials who kept making promises to stay in office, well those elected officials are long gone too.  Now, the tide is out, and we all see who is naked.  
 
So, what if the checks are cut, or stopped?  What if a Costa Rican retiree finds one day that the monthly check is reduced or gone?  What happens then?  Can a retiree even live abroad without a pensioneer visa?  What will the host government do if the monthly pension check stops?  Then what?  Think what this will do to the host country, too?  How many US pensioneers are abroad, spending their US retirement funds abroad, propping up that local economy?  What happens when that money flow is disrupted or stopped?
 
TEOTGKE is coming, and these thorny, difficult, future scenarios must be addressed now.  Please do not be a victim and be unprepared.  Look what happens when city services decline as the result of lack of funds.
 
Let me also point out that the mainstream media is playing its role in avoiding telling the truth.  Understand that there is an agenda being foisted on everyone, and nothing resembling the truth will be told unless it fits their current meme.  For example, notice there is NO mention of the general description of the four suspects in the story above?  Why not?  Is the reporter trying to tell the public some news?  Which if so, would not one interested in crime in their area want to know the suspects’ general description so as to be able to be on guard against possible future crimes?  Is that not obvious, and sensible?  Or, is it perhaps, that the reporter is sensitive to the TRUTH, and keeping with the meme of a culturally divisive country, heavily involved in class warfare, the reporter does not want to be characterized as being racist for pointing out the suspects general description and perhaps RACE?  Or was it the editor who chose not to tell that part of the story? 
 
Finally, why does the reporter not delve into the back story, that is, what were four thirty-something-year-olds doing far from their own neighborhoods in Los Angeles, instead hanging around committing crimes in San Bernardino, in the middle of the day?  Is this not a relevant question to ask and perhaps report about?  What else do we know about the suspects?  Is this now part of a crime wave, whereby out-of-towners stake out ATM’s in distant cities, stalk the users of the ATMs and then rob them?  This is certainly a story I want to know about, for sure.  So why no reporting of such investigative facts? 
 
Same things can be said about the reporting with respect to the looming pension disaster.  Who is keeping information from you?  Why is critical information not being reported?  For whose benefit is this?
 
Do I have any analysis on any of this and can I offer any insight as to what I see?  Sort of, but not really, because it is all so tenuous, and basically devolves back to sound money, which is only possible if the system suddenly transforms itself from this fiat ponzi scheme robbing savers.  With sound money, there should be no problems.  Like Mike Maloney says, we are basically in the gold re-evaluation phase.  Turmoil will be the order of the day.  For that, I am certain.  Absolutely certain.  The turmoil is all around, constantly.  Just open your eyes and look.
 
As for re-evaluation and sound money?  What do I know?  It is totally uncharted territory going forward, but past history suggests a painful adjustment.  
 
What I can do is monitor the pending bankruptcy cases in Detroit and San Bernardino [and others as they arise], and report, which I will do.  Remember, in San Bernardino, CalPers, the huge California Pension system, wants all of its past due payments owed by the City for the City’s public workers.  But, the City is broke, and cannot pay its current bills let alone past due millions, with interest, to CalPers, so the past due pension payments to CalPers have not been made and the debt to them is simply accruing, plus interest.  The sums are enormous.  Will there be haircuts?  Who will bear the losses if there are haircuts?  Is CalPers a secured or unsecured creditor?  Are the pensioneers secured or unsecured creditors?  
 
The bondholders, that is, the big banks who loaned the City all this money, who now are owed huge sums of money, what about them?  Who takes priority in the repayment process of chapter 9 bankruptcy?  That is, who gets paid first from what sums the City does actually have?  What assumptions regarding future revenue streams will be made?  Will those assumptions be accurate or hopelessly rosy, thus only delaying the problem?  What happens to the City and its citizens after bankruptcy?  
 
What if the City emerges from bankruptcy having wiped out MILLIONS of dollars in past due pension debt?  Will OTHER cities then do what San Bernardino did, thus triggering yet more chaos and financial strain on the system?
 
Will the City have to sell assets to pay bills?  If so, what are those assets worth, and who gets the money?  Will this just be a giant wealth transfer scheme to the big bondholders?  If so, will this not just be a death knell to the pensioneers?
 
There is some certainty here about some of this.  Fact: the City cannot pay all of its current creditors, including City workers and CalPers and the bondholders 100 cents on the dollar.  There WILL be losses incurred.  These losses will eventually trickle down to the regular folks.  If Bernanke prints, bails out the bondholders or the Fed Govt bails out California, then the entire world bears the losses from devalued dollars which lose their purchasing power.  It is a guarantee at this point that losses will be incurred, and the only questions are by whom and for how much.  How much longer will this unsustainable system last? 
 
To thus prepare accordingly, means to think about the long term view, intelligently, and reason to conclusions.  If one agrees that TEOTGKE is upon us, then that opens up many productive thinking opportunities.  This may not be pleasant.  If so, don’t do it.  And stop criticizing those of us who view it differently.  Just skip over these posts and comments.  There are a WEALTH of divergent viewpoints coming at you, courtesy of TF and his minions.
 
Besides, who is right here anyway, those with the long term view, or those who wish to ignore that view, and focus on a narrow slice of the investment landscape?  There is NO WAY to know until the future happens.
 
One should focus on the big picture, the macro view, and PREPARE ACCORDINGLY!
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110 Comments

Down Range's picture

Prepare!

Thanks CL. Great synopses of what is going on around us and what will get worse. We are all in uncharted territory today and are finding out daily if yesterdays decisions were the right ones for us and our loved ones. Thank God freeze dried food has a storage life of 25 years or so, as a couple have already ticked off.

Fortunately PM's have an infinite storage life, other than the majority that have been lost in accidents.

As someone once said, "These are interesting times we live in", or something like that.

Best to all and to all a good nite.

Dawg

TomMack's picture

tooth (2nd)

Twice in one week.  maybe an elusive wonth (1st) will happen. 

Anyway  everywhere you look there is a significant event that just seems to be brushed over.  It is as if we don't address it it will go away.  The middle east is in flames.  India's currency is crashing.  Southern Europe is barely able to borrow to  make it through the next debt repayment.  the US borrows and borrows because there is still some willing lenders but create more debt.   About the only negatve thing you hear is China's growth is only 7 or 9%.  Or that Russia is trying to recapture its old Cold Wars days. 

Now we are seeing the effect of this at home.  Promises and more promises were made but now we are unable to meet them.  It seems that the great ponzi schemers are quickly running out of people to scheme.  This is not going to end well as the current 1%, TPTB lose and give way to the new 1%.   Who and where they will be is going to be a hard fought battle.

lakedweller2's picture

This Is One of The Primary Issues

This all can happen and this is why every day is a lie from our governments.  This is why no one goes to jail.

Be Prepared's picture

The Retirement Plan... up in smoke!

It won't just be CalPers that implodes when the end game starts to end ravel.  With just an average of just $12,000 saved for retirement, after a lifetime of work, the reality that most older people will be facing won't be pretty.  But then... it won't be pretty for any of us.

El Gordo's picture

I see the problem...

...but I'm still uncertain as to the solution.  The fiat's value is inflating away as we speak, canned goods only last so long.  As to the municipal bankruptcies, I can still remember when we had a system of laws  in place that governed those matters, but the GM and Chrysler bankruptcies proved there is no regard for the rule of law anymore.  I suspect that the checks will continue to be issued to be beneficiaries for the forseeable future, but just as we have seen with Socialized Security, their amounts will not increase over time as inflation just whittles away whatever purchasing power they may have once had - the slow erosion of living standards versus the volcanic eruption.  As our politicians amuse themselves with issues of equality, race, gender, and the like and ignore the basics of energy, infrastructure, manufacturing, and agriculture, our nation dives deeper into the abyss.  At some  point, perhaps there will be a cataclysmic event that causes the majority to change their ways, but with the masses so dumbed down through the feel good educational system, I'm not sure a speedy recovery could occur as we have to re-learn the fundamentals and basics of everyday living all over again.  Hope that I'm all wrong.

Mudsharkbytes's picture

As a retiree…

…myself currently receiving a pension, I can only say I'm glad I've got a stack, meager as it is  - now if I can only remember which pond it sank in!

Almost forgot - sixth!

Dyna mo hum's picture

I am ahead of the curve

My  former employer is bankrupt now and I am waiting to hear from them. I am receiving a pension from them now and I am waiting for the court to determine what the extent of my $ haircut will be. It ain't easy in my world but it could be worse.

Dyna mo hum's picture

But still we have a lot to be thankful for

bullion only's picture

You should prepare for the future.....

"You should prepare for the future"  someone once said to me. "You'll be living there someday."

Never forgot those words. Been stacking ever since. Always lived below my means. Never had debt except my house and never ever planned that there would be any money from any one after I retired.

It has served me well.

RT

bullion only's picture

PS about the future

Never had student loans myself and won't allow my kids to get them either.

I have friends that took out loans against their homes to put their kids through an out of state or private university.

Those kids without solid science degrees or professional degrees will never be able to pay back those loans their parents took out or the ones they took out.

rt

Darth's picture

$#%@&!*%#

Damn CL, do you have to be such a downer? I’m losing teeth, my knees are blown out, and I was hopefully on the precipice of retirement. For you to make me realize that the hard earned checks in the mail won’t buy squat if they do come through, and in all likelihood they won’t come through, and there will be no way to buy my freedom is just damn near coolaid drinking material! Oh wait, I woke up a few years ago (took the red pill) and started storing productivity in a different more honest form, and hopefully I will survive the onslaught of broken promises. This is a good topic to bring forward because the math is the math, and no amount of MOPE can fix it!

ggnewmex's picture

wow

Thanks CL

i believe that you are talking to the choir here, but reading this, it really makes it incumbent upon us the share this knowledge with others. Your article is laid out so matter-of-factly.

Thank you for the reminder

gg

288

Mantis's picture

Scary time to be a

Scary time to be a pensioner.

Buy Gold!

ag1969's picture

Uhhhhhh...

Can't we just put all the retirees on food stamps and disability.  The retirees will somehow make that seem cool.  Kind of like keeping up with the Jonses, only in reverse.

atarangi's picture

J.S.B. should be fine - - -

I have enough money to last me the rest of my life, unless I buy something.

Johnny Silver Bearjohnnypicnow.jpg

opticsguy's picture

An ounce of gold per person per month of retirement

that was enough to retire on 100 years ago, and should be the goal of us stackers.  Hell, if you live frugally, you could probably make do with half  of that.

achmachat's picture

opticsguy

I'm trying to figure out why you'd have an entire ounce of gold of expenses per month if you're not paying rent.

Does it have anything to do with the exorbitant property taxes in the US? (I think that I pay less than 100€ property taxes per year for the house)

I have relatives in the US, and I tell them quite often that they only think they own their property... they're actually renting it from the government and the day that they can't pay that "rent", government will come and take it back.

murphy's picture

property taxes

could be any where from $1000  to $20,000 per year depending on location and value of the home. 2% of appraised value is a good estimate.

boatman's picture

3 million dollars

thats what my buddy jeff will be paid  for fixing ACs [in no way in management]  for the school board for 25 years, in $ and benefits..........[assuming he lives to 77 and the system doesn't implode which it WILL].........he retired at 46 years old  7 years ago.

now he was good at it, real good...........and i don't fault him at all for taking advantage of a situation.......but geeeeezuz.

same guy in private world would have got 1/5th of that.

rediculous and unsustainable.

WEST+JAPAN is broke.

bond market is starting to figure that out.

ag1969's picture

Achamat

My property taxes on the house are $4,600.00.  Then there are the cars, the dock (I live on a lake and have to pay a fee to the state to have a dock), the dump fees, I am on a community well and pay $350/quarter for water.  I live in a town where the property taxes are considered very low for the area.  Put my house in the town next door and the taxes would be 8 to 9 thousand.  But, I live in a state with no sales or income tax.  When I was in CT, I had sales and income tax and my property taxes were double.

Edit:  By the way, a clear reflection of our "ownership" society.  You work hard your whole life, pay off your house, but you still owe the town thousands of dollars every year or they will take it from you.  WTF?

Time to look into alloidal title and land patents, but that would probably make me a ter...ist.

sengfarmer's picture

TomMack

Good post. The only thing I would question is the line about the US borrowing and borrowing. That is not happening anymore. The latest TIC report shows selling pretty much across the board by former buyers of Treasuries.

What we  have is the Fed as the buyer of last resort and besides QE purchases they also have to redeem all those treasury notes flowing back for redemption.

G. Edward Griffin said in the "Creature From Jekyll Island", chapter 10, "The Mandrake Mechanism" that when the Fed had to buy back all that past debt plus interest, "then we will understand the meaning of inflation".  (1998)

That's where we are at.

Be Prepared's picture

@opticsguy - Gold Target

I would agree that would be a good goal.  Basically, if we assume that the average person will now retire at 67 (no longer 55) and we estimate that the average person will live another 20 years, we can then project they would need at least 240 ounces of gold.  Now if you are married, you would need to increase this amount at least another 120 ounces of gold based upon how the economies of scale for food and housing would mitigate the full effect of another person.  But the retirement years, generally, are full of medical conditions requiring medications and surgeries, a low guess would be another 2 ounces of gold per year per person for medicine plus a surgery fund of another 50 ounces (25 ounces per person).

The low estimate would be 510 ounces of gold by the age of 67 for a married couple.  This amount would translate into them converting, in today's dollars, approx. $714,000 fiat into gold wealth preservation over their productive years.  Just think in 2000, with a little forethought, a person could have bought their retirement for $153,000.  With the average person entering retirement with $12,000 fiat, the math starts to look extremely desperate.

The effects of Obummercare and other taxes and regulations will only load more burden onto a retired person because each change will be an unforeseen expense rather than a planned one.

*The above assumes a more suburban/urban setting where there would be little to no opportunity to augment food stores through extensive gardening.

DayStar's picture

RE: Hat Tips

Admin, I don't know if this is a policy change or if it is just broke, but the forums do not appear to be displaying the hat tip icon.

DayStar

boatman's picture

anyone living

in a state without a cap on homesteaded [owner occupied] residential real estate taxes is asking for BIG trouble.

in florida its 3% raise a year max...........and that is not getting voted out ever.

i pay 480$/yr. and have never had an electric bill over $70.

but then i am not trying to freeze meat in the living room and i enjoy heating with wood.

in the coming great reset, social security and medicare will be pushed to 70 yrs. old and means tested.

yes, if its there at all.

if we are living in bunkers standing guard all night, i'll just check out.

i've had too much fun for 6 decades+ to live the rest of my life like a rat.

hat tip icon working for me, daystar.

all my troubles with the site ended when i did a total recovery of my computer.......there are bugs that nothing can clean out or keep from getting in.

argent rampant's picture

Hmmmmmmm. Yikes!

From Liberty Blitzkrieg:

http://libertyblitzkrieg.com/2013/08/19/as-its-currency-collapses-india-doubles-down-on-big-brother-surveillance/

__________________________

What’s a clueless government trying to micromanage the affairs of over a billion people supposed to do when the wheels start coming off the wagon? If you’re India, you blame the country’s financial and societal woes on the buying of gold and attempt to prevent people from purchasing it. When that doesn’t work, and your currency continues to collapse, then what?

Well, you decide to double down on a surveillance state. That’s precisely what the enlightened government bureaucrats at India’s Ministry of Home Affairs (MHA) have decided to do. From The Hindu:

Amid a raging global debate on privacy versus surveillance, monitoring and use of intrusive technologies by governments, the Directorate of Forensic Sciences in the Ministry of Home Affairs (MHA) is set to purchase a range of equipment and software that will allow it to conduct deep search, surveillance and monitoring of voice calls, SMS, email, video, Internet, chat, browsing and Skype sessions on an unprecedented scale.

The MHA document of July 12, 2013 also lists software-based tool kits for logical level analysis of GSM and CDMA mobile phones — which will comprehensively cover phones and SIMs used by India’s 860 million subscribers across 2G and 3G networks. This will be capable of extracting the phone’s basic information and SIM card data, including in your phonebook and contact list, call logs, caller group information, organizer, notes, live and deleted SMSs, web browser artifacts, multimedia and email messages with attachments, multimedia image audio and video files and details of installed applications, their data, traffic and sessions log. It will allow access to iPhone backup analysis, including those which are password protected. Blackberry, considered safe by unsuspecting users, will also be fair game, since it will support Blackberry IPD backup analysis, even when password protected.

¤'s picture

A Challenge & Reward

If anyone can locate and post the link to a post I put out at The SpeakEasy within the past year about Fukushima/US west coast and my thoughts how this will play out I will donate a 3 month subscription to the pay side of this site.

Bring it to my attention and 3 months is yours...good luck!

If one of subscribers take up the challenge and find it you can pick anyone you want (privately) and the same reward applies.

sierra skier's picture

Americans have been Irresponsible

For most of their working lives.

Instead of taking their futures into their own hands, we as American Workers have passed the responsibility of our retirement futures to our leaders who have been busy absconding with and giving away the funds. Of course our leaders have made promises to take care of us through pensions and social programs but they forgot to fund these programs in their hurry to get reelected. Instead they have taken the funds that should have been directed towards these programs and flagrantly spent them on useless government projects, banker bonuses and the welfare voters for reelection.

Now that they have bled dry and raided the funds from these retirement programs they will aim at attacking the huge pool of private funds folks have put aside on their own for retirements in an effort to keep the ball rolling a little longer.

Not only are the folks who are expecting government pensions and SS support going to be disappointed but those who have diligently saved on their own are going to be cleaned out as well once the government gets their hands on those carefully saved money.

In todays world of ZIRP and manipulated markets making saving and investment growth nearly impossible they will make it even worse with their desire to take what is left to help give the nonproductive 'Their Fair Share'. This will not be a pretty picture.

boatman's picture

maximizing everything for the now

is just human nature..........which is not changing anytime soon............and the more stuff u have the more you want.

i just wish i had been alittle more serious collecting panties when i was in high school.....afterall, i had the rest of my life to go surfing

argent rampant's picture

Han Jun Low on silver (from Seeking Alpha)

Interesting quick read. Much shorter and to the point than Avi Gilburt's piece, which I did not finish, and addresses Gilburt's points nicely.

http://seekingalpha.com/article/1648432-silver-a-contrarians-appeal-to-the-bears

opticsguy's picture

Property taxes

same with ag.  My house is way to big to retire in, but I have to expect a $4K/year property tax bill and utilities.  Those people who buy giant motor homes might have the right idea.

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