• Tag Archives Retirement
  • Here’s how a few government pension funds are trying to close their $7 trillion funding gap

    There may perhaps be no other group of investors that’s more DESPERATE today than pension funds.
    Pensions, of course, are the giant funds responsible for paying out retirement benefits to workers.
    The idea is that both the employer and the employee typically contribute a set percentage of the employee’s salary throughout his or her career with the promise that, upon retirement, he or she will receive a fixed monthly payment.
    Many state and local governments rely on these ‘defined benefit’ pension pension plans, as do a handful of large corporations.
    The reason that these pension fund are so desperate is that the vast majority of them are underfunded.

    This post was published at Sovereign Man on August 16, 2017.


  • Government & Revolution – Is it Inevitable?

    I have been warning that as governments move closer to this major event of a Sovereign Debt Crisis which begins next year with the start of the Monetary Crisis Cycle, they historically will ALWAYS, and without exception, bite the hand that has fed them. The object for government is survival of the fittest and that is them. This is never really about helping people as they raise retirement ages, punish the youth with school loans they cannot discharge, and exempt themselves from most laws that apply to us. This is also never about how to properly run the economy for the benefit of all. It always boils down to it being them against us. Throughout history, there has never been even one benevolent government that has ever surrendered power willingly for the good of the country or the people. That has NEVER happened even once. Power has always had to be ripped from their grasp either by the people, an internal coup, or some foreign invader.

    This post was published at Armstrong Economics on Aug 15, 2017.


  • Social Security requires a bailout that’s 60x greater than the 2008 emergency bank bailout

    / August 11, 2017
    A few weeks ago the Board of Trustees of Social Security sent a formal letter to the United States Senate and House of Representatives to issue a dire warning: Social Security is running out of money.
    Given that tens of millions of Americans depend on this public pension program as their sole source of retirement income, you’d think this would have been front page news…
    … and that every newspaper in the country would have reprinted this ominous projection out of a basic journalistic duty to keep the public informed about an issue that will affect nearly everyone.
    But that didn’t happen.
    The story was hardly picked up.
    It’s astonishing how little attention this issue receives considering it will end up being one of the biggest financial crises in US history.
    That’s not hyperbole either – the numbers are very clear.
    The US government itself calculates that the long-term Social Security shortfall exceeds $46 TRILLION.
    In other words, in order to be able to pay the benefits they’ve promised, Social Security needs a $46 trillion bailout.
    Fat chance.

    This post was published at Sovereign Man on Simon Black.


  • Despite Record Stock Markets, Almost Half of Americans Own No Stocks

    On April 7, 2011 the Dow Jones Industrial Average closed at 12,409.49. Yesterday, it closed at 22,048.70, an increase of more than 9600 points over the six-year span. A bull market of this magnitude lasting more than half a decade would have been expected by Wall Street experts to have sucked in even the most cynical Wall Street naysayers. It hasn’t.
    Each April, the polling firm, Gallup, conducts its annual Economy and Personal Finance Survey. It asks U. S. adults whether they personally or jointly have money invested in the stock market, either in individual stocks or stock market funds, including through vehicles such as 401(k)s and Individual Retirement Accounts (IRAs).
    Gallup began its 2011 survey on April 7, 2011, the day that the Dow closed at 12,409.49. That year’s survey found that 45 percent of Americans owned no stocks. Despite a meteoric rise in the major stock indices since then, this year’s Gallup poll found that 45 percent of Americans still own no stocks. Since 2011, the number of Americans eschewing stock ownership has ranged from the mid 40 percent level to a high of 47 percent in April 2013. In April 2007, before the financial downturn had gripped the attention of Americans, Gallup found that only 34 percent of Americans owned no stocks.

    This post was published at Wall Street On Parade on August 10, 2017.


  • Legg Mason Survey Finds Baby Boomers Are Roughly $30 Trillion Short On Retirement Savings

    There are roughly 76 million Baby Boomers in the United States that are about to transition out of the highest wage earning years of their lives and into retirement where they’ll be making precisely nothing. Unfortunately, as MarketWatch points out today, those Baby Boomers are woefully unprepared for what awaits them.
    According to Legg Mason, the average Baby Boomer needs roughly $650,000 to fund their retirement years but have only managed to save about about $250,000 in their defined contribution plans. Now, while equity markets don’t seem to think this is a big deal, someone will eventually have to cover that $30 trillion shortfall…and, we suspect that’s a funding hole that even the American taxpayers can’t cover.
    Baby boomers, or those born between 1946 and 1964, expect they’ll need $658,000 in their defined contribution plans by the time they retire, but the average in those employer-sponsored plans is $263,000, according to a survey of 900 investors by financial services firm Legg Mason. Older boomers, who are 65 to 74, have an average of $300,000. Their asset allocation for all of their investments are also conservative, according to QS Investors, an investment management firm Legg Mason acquired in 2014, with 30% in cash, 24% in equities, 22% in fixed income, 4% in non-traditional assets, 8% in investment real estate, 2% in gold and other precious metals and 8% in other investments.

    This post was published at Zero Hedge on Aug 6, 2017.


  • What Ponzi Scheme? Public Pensions Average 0.6% Return In 2016 Despite 7.6% Assumption

    We’ve frequently argued that public pension funds in the U. S. are nothing more than thinly-veiled ponzi schemes with their ridiculously high return assumptions specifically intended to artificially minimize the present value of future retiree payment obligations and thus also minimize required annual contributions from taxpayers…all while actual, if immediately intangible, underfunded liabilities continue to surge.
    As evidence of that assertion, we present to you the latest public pension analysis from the Center for Retirement Research at Boston College. As part of their study, Boston College reviewed 170 public pension plans in the U. S. and found that their average 2016 return was an abysmal 0.6% compared to an average assumed return of 7.6%.
    Meanwhile, per the chart below, the average return for the past 15 years has also been well below discount rate assumptions, at just 5.95%.

    This post was published at Zero Hedge on Aug 2, 2017.


  • Hertz ‘RESCINDED’ Fake Promises to Investors, Shares plunge

    It didn’t even bother explaining why. Investors are left to their own devices to figure it out. On Friday after markets had closed, at the end of July, when no one was paying attention, the beleaguered rental-car giant Hertz rescinded in an SEC filing a big-fat promise it had made on May 31. The promise was made to induce investors into shelling out $1.25 billion for a new issue of bonds.
    Hertz had promised in a May 31 press release, as these senior second-lien secured notes were being priced, that it would use the proceeds from the sale of the bonds to buy back existing debt. This was important to bond buyers. As Hertz claimed, the notes were issued ‘as part of an overall plan to optimize the Company’s capital structure.’
    ‘Optimizing the capital structure’ – that’s good. Not adding more debt. This is what it promised in its press release at the time:
    Hertz intends to use a portion of the net proceeds from the issuance of the Notes, together with available cash, to redeem in full all of its outstanding $250.0 million aggregate principal amount of 4.25% Senior Notes due 2018 (the ‘2018 Notes’) and $450.0 million aggregate principal amount of 6.75% Senior Notes due 2019 (the ‘2019 Notes’). Hertz intends to use the remaining net proceeds from the issuance of the Notes, together with available cash, to refinance certain of its other existing indebtedness in one or more transactions following the consummation of the Offering, which may include repayments of outstanding borrowings and/or commitment reductions with respect to its senior credit facilities and/or repurchases, redemptions or retirements of certain of its other senior notes.

    This post was published at Wolf Street on Aug 1, 2017.


  • The Global Pension Nightmare – Global pension underfunding will be $400 trillion by 2050.

    Apparently good things do come to an end. The global pension outlook is looking bad and a large part of this stems from people living longer and simply not saving enough while they work. There are some major problems on how pensions are structured and the US, the wealthiest nation in the world is shifting to a ‘work until you die’ retirement plan. And this is for the richest nation so you can imagine how things look in other countries. Most people continue to ignore these massive problems but it is hard to miss the fact that by 2050 global pension funds will be underfunded by $400 trillion. Does this sound sustainable?
    The global pension problem
    There are some major reasons as to why this problem is occurring. For one, long-term growth has slowed and returns are simply not looking great. Many pension funds have optimistic return rates that are just unsustainable. We are in a lower return market.
    Another issue is that people simply do not save enough for retirement. In the US half the country is living paycheck to paycheck. The recommended savings rate is 10 to 15 percent of annual salary but that just isn’t happening across the board. With the shift from defined benefits to 401k casinos, people are now left with virtually nothing for retirement (outside of Social Security).

    This post was published at MyBudget360 on July 27, 2017.


  • Something Big, Bad And Ugly Is Taking Place In The U.S. Retirement Market

    While the highly inflated value of the U. S. Retirement Market reached a new high this year, something is seriously wrong when we look behind the scenes. Of course, Americans have no idea that the U. S. Retirement Market is only a few steps from falling off the cliff, because their eyes are focused on the shiny spinning roulette wheel called the Wall Street Stock Market.
    Yes, everyone continues to place their bets, hoping and praying that they will win it big, so they can retire in style. Unfortunately, American gamblers at the casino have no idea that the HOUSE is out of money. The only thing remaining in their backroom vaults is a small stash of cash and a bunch of IOU’s and debts.

    This post was published at SRSrocco Report on JULY 24, 2017.


  • S&P 500’s Biggest Pension Plans Face $382 Billion Funding Gap

    People who rely on their company pension plans to fund their retirement may be in for a shock: Of the 200 biggest defined-benefit plans in the S&P 500 based on assets, 186 aren’t fully funded. Simply put, they don’t have enough money to fund current and future retirees. The situation worsened for more than half of these funds from fiscal 2015 to 2016. A big part of the reason is the poor returns they got from their assets in the super low interest-rate environment that followed the financial crisis. It’s left a hole of $382 billion for the top 200 plans.
    Of course, the percentage of workers covered by traditional defined benefit plans – those that pay a lifetime annuity, often based on years of service and salary – has been declining for decades as companies shift to defined contribution plans such as 401(k)s. But each time a pension plan is terminated, canceled or altered, thousands of workers are affected.
    Last month, the 70,000 participants in the United Parcel Service Inc. pension plan learned they won’t earn increased benefits if they work after 2022. Late last year DuPont Co. announced it would stop making payments into its pension plan for 13,000 active employees, and Yum! Brands Inc. offered some former employees a lump-sum buyout to offload some of its pension liabilities. General Electric Co. has a major problem. The company ended its defined benefit plan for new hires in 2012, but its primary plan, covering about 467,000 people, is one of the largest in the U.S. And at $31 billion, GE’s pension shortfall is the biggest in the S&P 500.

    This post was published at bloomberg


  • Which Is Worse? America or France?

    French Fraud POITOU, FRANCE – ‘Which is worse? America or France?’ The question must be put in context. We were invited to dinner with local farmers last night. Jean-Yves and Arlette live in a modest house in the nearby town – an efficient and cozy place built about 25 years ago. They’ve added a solarium to the back, where we had dinner.
    ***
    Arlette operates a dairy farm left to her by her parents. Jean-Yves runs a cattle and cereal farm that was in his family. A son and his wife moved into the farmhouse in Jean-Yves’ place. Anticipating retirement, he and his wife moved into town.
    ‘You have Trump. But we have Macron,’ Jean-Yves said. On balance, France probably comes out ahead on that score. Macron is young, smart, and good-looking.
    ‘Yes, but he is a fraud,’ Jean-Yves continued. ‘He claims he will change things. But he is mainstream. Besides, I don’t think he can change things even if he wanted to.’
    Over the years, we’ve commented on many public figures here at the Diary. We can’t remember one we didn’t consider a fraud in some way. And so far, we don’t think we were wrong about any of them.
    French President Emmanuel Macron is hardly an outsider or a rebel. He is a graduate of France’s elite cole Nationale d’Administration. And he was finance minister under the previous president. So entrenched and unyielding is the French bureaucracy – France’s Deep State – that it would take a real firecracker to change it. Mr. Macron is not that kind of a guy.

    This post was published at Acting-Man on July 18, 2017.


  • Illinois “Budget Deal” Is Likely The Death Knell For The State’s $130 Billion Underfunded Pensions

    Last August, in a post that attempted to explain why public pensions are really about $8 trillion underfunded, as opposed to the $3-$5 trillion that you frequently see tossed around in the press, we described pensions in the following way:
    Defined Benefit Pension Plans are, in many cases, a ponzi scheme. Current assets are used to pay current claims in full in spite of insufficient funding to pay future liabilities… classic Ponzi. But unlike wall street and corporate ponzi schemes no one goes to jail here because the establishment is complicit. Everyone from government officials to union bosses are incentivized to maintain the status quo…public employees get to sleep better at night thinking they have a “retirement plan,” public legislators get to be re-elected by union membership while pretending their states are solvent and union bosses get to keep their jobs while hiding the truth from employees.
    And while we weren’t specifically writing about Illinois at the time, that state’s recent “budget deal” perfectly mimics our point and illustrates precisely why America’s underfunded pension ponzi schemes continue to grow at alarming rates, despite going largely unnoticed by soaring equity markets, and will ultimately be the catalyst for a major correction in the U. S.
    So, what are we talking about? As Bloomberg points out today, one of the ways that Illinois managed to “fix” its budget crisis, was by simply “kicking the can down the road” on their future pension funding requirements…pensions which are already only ~35% funded as it is.

    This post was published at Zero Hedge on Jul 14, 2017.


  • Luxury Bull Market

    The wall of worry continues to propel stocks higher as this long plodding economic expansion is assumed to be in the later innings. With low-interest rates and slow growth, many are still waiting for the full-throated recovery to manifest. However, for the luxury and leisure world, the good times just keep rolling. Cruise ships, air travel, luxury car sales, hotels …you name it and it’s delivering consistent sales expansion over the past 6 years. With aging boomers and an economic cycle with room to run there could be more to come from the big spenders and the silver-haired crowd. The global baby boom is transforming into the senior surge who seek more frequent and experiential vacations. As strong as the benchmark S&P 500 Index has been, the Luxury sector has outperformed most stocks.
    Travel isn’t just for the senior circuit. In a study looking at the priorities of Millennials, travel came out as a higher priority than buying a home or car or even paying off debt. In China, travel was the highest priority by a wide margin. Floating hotels continue to benefit from appreciating retirement wealth from the rapidly aging 1st World countries. Carnival Cruise Lines stock is up 32% since Trump was elected and 340% since the 2008 bottom.

    This post was published at FinancialSense on 07/13/2017.


  • Customizing your Plan B [Video]

    Over the past few days you’ve learned A LOT including…
    ‘ How to generate exceptional investment returns, while taking minimal risk, with lucrative investment strategies outside the mainstream
    ‘ How to protect your assets and become invincible to financial crises and frivolous lawsuits
    ‘ How to save tens of thousands of dollars by legally reducing your taxes
    ‘ How to obtain a second passport (potentially for free) that will provide you the lifelong benefit of more options to live, work, invest, travel, and do business around the world.
    ‘ How to liberate your retirement savings with a genius structure that gives you back control over your own money and let’s you explore lucrative investments outside out of drastically overvalued stock markets.

    This post was published at Sovereign Man on July 5, 2017.


  • ‘Investors Are Being Swindled’: Canadian Accountants Slammed

    People ‘mistakenly believe their pension plans, mutual funds, and other investments are safeguarded.’
    Canada’s Finance Minister Bill Morneau was one of the country’s top pension fund management professionals before he went into government. But when he recently addressed Concordia University business students, not one asked about the country’s $4 trillion national debt, much of which is pension-related.
    That’s not surprising – because, as the Fraser Institute notes, nearly three quarters of those debts are not included in the federal and provincial governments’ financial statements. So, Canadians have no clue how bad the country’s true financial situation is.
    This lax reporting is spread throughout the system, including public companies, says one expert.
    ‘Investors are being systematically swindled out of large amounts of retirement savings,’ says Al Rosen, a forensic accountant and co-author of Easy Prey Investors, a recently-released book that details shortfalls of Canada’s lax reporting standards.
    Accounting scandals abound
    ‘Investors mistakenly believe that their pension plans, mutual funds, and other investments are safeguarded,’ says Rosen. ‘In fact, they are suffering losses that are monumental, compared to individual publicized scams.’
    A key challenge, says Rosen, relates to Canada’s use of International Financial Reporting Standards, which ‘assign excessive power and choice to corporate management, providing them the ability to inflate corporate profits.’ Rosen cites a range of accounting scandals including Valeant, Nortel, and Sino-Forest as examples of Canadian laxness.

    This post was published at Wolf Street on Jul 3, 2017.


  • The new retirement model revolves around dying broke and realizing that the 401k model of investing is a sham for most Americans.

    The new retirement model means working until you die. Most Americans are broke and living paycheck to paycheck. Yet the stock market is near a modern day peak. What is going on? Wasn’t the 401k experiment that launched in the early 1980s to replace pensions supposed to be a panacea in terms of building out nest eggs for the masses in their golden years? That was the idea but unfortunately inflation has eaten away at the standard of living and many Americans simply did not have enough to save when it came to retirement. We know the drill – sock away X percent a month and after 30 or 40 years you will have seven figures. Well here we are, nearly 40 years from that experiment and most Americans have little to nothing in their retirement accounts and the pension (a forced 401k in a way) is virtually extinct. So is dying broke the new retirement model?
    Americans have very little saved
    This might come as a surprise but most Americans have very little saved when it comes to retirement (assuming they even have retirement savings). The numbers don’t even look that great after a massive bull market.

    This post was published at MyBudget360 on June 30, 2017.


  • UMich Consumer Confidence Slips To 7-Month Lows As Hope Fades

    Despite modestly beating expectations, UMich consumer sentiment for June dropped to 95.1 – the lowest since Nov 2016 – led by a collapse in ‘hope’ for the future.
    Inflation expectations for the medium-term fell very modestly but both short- and medium-term remain near record lows.
    Personal finance expectations improved in June as did the percentage of Americans expecting higher incomes. However, the percentage of Americans who expect a comfortable retirement dropped notably… and the percentage of Americans who expect the country to have contonuous good times for the next 12 months also tumbled.

    This post was published at Zero Hedge on Jun 30, 2017.


  • The Good, the Bad, and the Ugly of Annuities

    The following is a summary of our recent podcast interview, which can be accessed on our site here or on iTunes here.
    For many, an annuity can be a great way to shelter capital for retirement, however, as with most contracts, all of the nuances, fees, expenses, and details need to be understood up front.
    This time on Financial Sense we spoke with Rob Bernard, a financial advisor at PFS Group, about what investors need to know when considering annuities, and how to make the most of the benefits annuities offer.
    The Ins and Outs of Annuities
    There are three types of annuities: fixed, variable, and immediate.
    A fixed annuity is set for a period of time, normally at a fixed interest rate, often with a teaser rate for a year, and a floating thereafter.
    A variable annuity is set up with various mutual funds inside of it. It incorporates stock market performance into its valuation and will gain value with the markets.
    An immediate annuity is annuitized right away, allowing an investor to begin receiving payments from the start.

    This post was published at FinancialSense on 06/30/2017.


  • Your Future Wealth Depends on what You Decide to Keep and Invest in Now

    Millienials look for instant gratification Spend half of their income on leisure Instant gratification doesn’t work if need to save for the future Savings rates falling, few have retirement funds Important to understand marginal difference between spending and pleasure Future wealth depends on what you decide to keep and invest in now This week the festival of all festivals begins, Glastonbury 2017. Ed Sheeran, Foo Fighters and Barry Gibb will each be singing to the 250,000 revellers who are currently on their way to Somerset. To those unfamiliar with Glastonbury it is a glorious few days in the countryside with camping and music. Every year there is far too much mud, lots of tears, alcohol, dodgy substances, hippies and great bands. Not to mention the fancy dress outfits and the toilets with questionable sanitary conditions. It is brilliant fun which everyone should try at least once.

    This post was published at Gold Core on June 21, 2017.