Financial preparedness - Pension Benefit Guarantee Corporation Running Out of Cash

[ATCclears]

Pension Benefit Guarantee Corporation Running Out of Cash, Millions Affected | MishTalk

The Pension Benefit Guarantee Corporation (PBGC), a government (taxpayer) funded entity created to "guarantee" pensions of private corporations, is on the verge of bankruptcy.

Teamsters and other unions are poised to take huge pension hits. Previously, airline employees have taken a hit.

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[woody06]

This is an interesting read. It looks a lot like a private sector version of PERS. Be very interesting to see how it plays out. Any thoughts?

 

[IronMonster]

It's gonna play out just like it looks, all these people who thought they had a retirement are going to have keep working while the bankers and money managers who screwed them sail off into the sunset on their billion dollar golden parachutes

 

[Camelfilter]

It's gonna play out just like it looks, all these people who thought they had a retirement are going to have keep working while the bankers and money managers who screwed them sail off into the sunset on their billion dollar golden parachutes

...or a quiet back room government bailout deal. "We'll read it after it's passed"...could result in a "nifty" economic situation ala Greece...

 

[Caveman Jim]

Corporate America cares not one bubblegum about their peeons (workers)!!! Never has. SMH

 

[The Heretic]

This is the major reason why I prefer to have complete control over my retirement funds. This is nothing new; a lot of corporate pensions have failed and left the worker holding the bag. Getting the government involved only makes it worse.

Eliminate income taxes and replace them with a flat sales/consumption tax which everybody pays (including non-profits/et. al.) on every product/service they directly consume (i.e., not for resale). No deductions, no minimums, no rebates, no exemptions, no "sin taxes", no subsidies.

Then each person is free to invest as much as they want wherever/whenever they want and pay no tax on the returns.

I read an article a few days ago asserting that one of the major problems with the current economy is that corporations are not investing their "cash" - they are just sitting on it. The article then asserted that this is hurting the economy because that leaves only the government to invest in the economy which is highly inefficient.

I am not so sure about that - there are millions of private citizens who invest in stocks and bonds/etc. and many millions more who theoretically could invest if they wanted to (instead of buying a new flat screen TV every other year).

But the article does have a point - why are the corporations sitting on that "cash"? Taxes? Could be one reason; there are all kinds of complicated rules about what is a "capital" expense and what isn't for the purpose of taxes.

 

[edslhead]

The Western Conference of Teamsters is still very well funded .
Funding Status | The Western Conference of Teamsters Pension Trust

 

[Sstrand]

Heretic
You are sadly Mistaken if you think you have even a smidgen of control over your retirement funds.
All it takes is the right liberal majority in D C to "nationalize" money in all pension funds . . . past, present, and future . . . all in the guise of protecting those who have paid into such funds. THEN add the money into Social Security and "equalize" payments to all citizens in the name of "fairness!"
You don't believe it will ever happen? Do you think the politicians can keep their hands off what likely amounts to several trillion dollars ripe for the taking????????

Sheldon

 

[The Heretic]

Heretic
You are sadly Mistaken if you think you have even a smidgen of control over your retirement funds.
All it takes is the right liberal majority in D C to "nationalize" money in all pension funds . . . past, present, and future . . . all in the guise of protecting those who have paid into such funds. THEN add the money into Social Security and "equalize" payments to all citizens in the name of "fairness!"
You don't believe it will ever happen? Do you think the politicians can keep their hands off what likely amounts to several trillion dollars ripe for the taking????????

Sheldon

I currently have control over my retirement funds - much more so than someone who has a pension.

Of course there is the danger of the government - either left or right - trying to "nationalize" retirement funds. The result would be chaos in the market and they know it, so I kind of doubt anyone in government would try it - except maybe for that idiot Trump. Do you think I would sit around waiting for such a law to go into effect once it was passed? I and millions of others would pull our funds from the market overnight.

You can rant all you want about the possibilities, but today is today and that threat is still hypothetical, not a reality.

But such a threat is yet another reason why we should not tax income and free up what people can do with the fruits of their labor.

 

[ATCclears]

The Chicago Police Pension Fund may be broke on or before 2021.

Illinois Too Broke to Fix: Chicago Police Pension Fund Broke by 2021 at the Latest | MishTalk

 

[mjbskwim]

This is the major reason why I prefer to have complete control over my retirement funds.

So all your savings is in gold,silver,cash and of course since you're on this site,guns
Otherwise you don't really have full control do you now?
ANYONES funds can go away if the perfect storm hits.
I just hope the guidos at my union aren't in this mess

 

[HB of CJ]

Yep: the long term solution is to have no official company sponsored and financed pensions at all. Instead give the employee a little bit more with the grand unheard of expectation that the employee will provide HIS OWN investment program.

It is called a savings program. Something unheard of today. A diverse conservative portfolio designed around long term stability. The problem today is that the average Joe worker has no idea of what it is like to stay within a monthly budget?

CALPERS, (California Public Employees Retirement System) is in dangerous financial shape. So bad now that most California Politicians are just not talking about it. Three percent at fifty? How are they going to fund it? The answer is that they can not.

An Old Coot who posts here too much has had his tiny CALPERS pension cut three times now. A little bit. Various excuses. A class action suit is practically and legally impossible. What God and Government gives they can also take away. Get used to it.

 

[The Heretic]

So all your savings is in gold,silver,cash and of course since you're on this site,guns
Otherwise you don't really have full control do you now?
ANYONES funds can go away if the perfect storm hits.
I just hope the guidos at my union aren't in this mess

1) You don't control the value of cash, gold or silver so you don't really have full control over those either, even though they may be right there in your grubby little fingers.

Come knocking on my door seeking food, shelter or other goods and services, I won't be accepting gold or silver (I don't have an easy way to verify what it is, nor an easy way to know the current market value).

2) I am much more concerned about paying my current and future bills than the government taking my retirement funds away from me by literally stealing them - as I already stated, they would most likely have to pass a law and said law would crash the economy, and the populace would literally looking for their heads to roll - and they know it.

3) I can access my retirement funds almost as easily as I can access the funds in my checking account, but I don't need either of them to survive. The only debt I have is my mortgage, and if the mortgage holder is still in place, then so are my funds to pay that mortgage.

It may all be a house of cards, but the people who keep it propped up have much more to lose than the general populace.

In the 40 to 50 years I have been a prepper of sorts, I have heard multitudes of doom prophets insist that the collapse will happen "real soon now" and that it is inevitable. Whenever I point out that their prophecies have not come true, they either respond with "yet" or "but this time it is different".

Yeah, well, my parents and grandparents made it through the Great Depression and two world wars, and they not only survived, they thrived. We have it much easier than they ever did.

I prepare, but a global collapse is way down my list of probable futures. I don't have my funds in pensions, my funds are in a 401K and several IRAs, spread out over multiple funds each of which is spread out over many corporations and industries. There is risk, but not all my eggs are in one basket. Last year I swapped around from 80/20 equities/bonds to 80/20 bonds/equities. My contributions ($30K per year) have been going into the equity market so the equities are building back up slowly. I also have real estate (20 acres and a house and shop) with real equity there, and enough cash in my checking account to last a couple of years without income.

So I don't have all my eggs in one basket.

 

[Caveman Jim]

So all your savings is in gold,silver,cash and of course since you're on this site,guns
Otherwise you don't really have full control do you now?
ANYONES funds can go away if the perfect storm hits.
I just hope the guidos at my union aren't in this mess

Sadly to say Bro but all unions are the same, some are just much more greedier than others...

 

[woody06]

Yep: the long term solution is to have no official company sponsored and financed pensions at all. Instead give the employee a little bit more with the grand unheard of expectation that the employee will provide HIS OWN investment program.

The brutal reality is that most people would just spend it rather than save for retirement.

 

[HB of CJ]

Then they starve. Sad but true.

 

[The Heretic]

The brutal reality is that most people would just spend it rather than save for retirement.

That is their choice. Just because people are stupid doesn't mean it is anybody else's job (government, society or corporation) to save them from themselves by forcing them to save.

A couple of weeks ago I made a spreadsheet of my SSI contributions based on my approximate income over the years. Each year I multiplied the income by the total SSI tax rate for that year (both individual and employer), then I added up that column to get a sum. I also created a new column which was that year's contribution multiplied by the average stock market return over the last 50 years (9%) and set it up to add the previous year - basically how much I would earn if I had invested the SSI contributions in the stock market instead of giving it to the government in the form of SSI taxes.

I did better if I invested the funds myself, plus if I die before I exhaust my own funds, they are left to my family. If I die at any time before or after retirement, any remaining SSI funds left in my account go to the government, not my family (I am single with one child - so no spouse).

In short, I would and could and can do better than the government can with my own money, saving and investing it on my own. Moreover, there are times when a person needs money now, not 40 years from now. To pay for a broken car, kids braces, a leaky roof. What good does SSI (or a pension or a 401K/IRA) do you at 30 if your kids need new clothes, a roof over their heads, etc. - to gov. is taking 12+% of your income and using it to pay down their interest on the deficit, and to pay the SSI benefits for your parent's generation. My kids are paying for mine - they will probably never see a penny of their own contributions (which is why I am trying to save for them).

Don't tax income. Tax sales. Flat rate for everybody and everything. No deductions, no exemptions, no sin taxes, no rebates, no subsidies, everybody pays and pays the same rate for everything.

This will let people invest (save) as much as they want in whatever they want, and use it when they need it, without penalty or taxation.

BTW - the best investment I made was in my education/training - first the military, then 4 years of college (2 associate degrees), and then teaching myself how to write software (I am still teaching myself after 30 years of programming professionally - almost every day I spend an hour or two learning something new about software engineering). The second best investment I made was paying off all debt. The third best investment was putting aside a third of my income every year into savings including 401K and Roth IRA - although that ties with my real estate investment (which may wind up be even better).

 

[The Heretic]

Then they starve. Sad but true.

Too bad so sad.

 

[IronMonster]

So all your savings is in gold,silver,cash and of course since you're on this site,guns
Otherwise you don't really have full control do you now?
ANYONES funds can go away if the perfect storm hits.
I just hope the guidos at my union aren't in this mess

I did as much in fall of 2013. Cashed out $150k of retirement money out of the market and bought gold and silver.

Since I did that silver (where most of my investments went) has dropped in half and the stock market has doubled. All said cost me around $200k of gains (combined loss on the silver plus missed gains in the market)

It is what it is, I can't cry about it now and I sure thought what I was doing was prudent and reasonable.

Of course I have not really lost anything until I sell and I have 20 years left before I retire so there hopefully will be a chance to convert the metal into other goods at a much better exchange than what's possible today.

My plan all along was when everything crashed to convert the gold and silver into real estate (when the silver was high and property depressed)

It might happen, it might not.

Then again I might drop dead of a heart attack tomorrow and my wife just liquidate the metal (I struggled to convince her we should get out of the market and buy metal, she has been pretty good about not saying "I told you so" but I know she sees no value in holding precious metal over paper investments, she is an accountant after all)

 

[The Heretic]

Yeah - when I went from stocks to bonds last year I lost a little - a couple percent - and then I lost out somewhat on the market blowing the top off and all the gains since then. During the dot com crunch I was down 50% on paper but hung on and later that same investment doubled - although it wasn't that much to start with.

I am so close to retirement right now that I won't be sad to just hang on to what I have already. The last few years I have not really had much growth and my 401K - which I setup and manage (as to which funds I hold) - does better than my IRA which Edward Jones "manages" for me (no real growth there last couple of years) so I am not sure lately what EJ is doing for me, but they haven't posted a persistent loss either.

Right now, in theory at least, my real estate is doing the best of all things I have money into - but that remains to be seen - when I sell will be when I really know if I made out or not. I don't think I will lose anything, and if I even break even (principal and interest and tax paid equal selling price) then I will have lived here for nothing and built equity at least. If I make a profit then I won't have to pay tax on it either.