Friday, September 23, 2011

Pension Money! Get Yours *Frist!

I spelled first wrong on purpose. Sometimes I do these things to amuse myself. Idiots on heavily trafficked blogs taught me this.

One of the really laughable and delusional things (something I predicted over 20 years ago) that is starting to get a lot of coverage lately- is this idea that U.S. pension funds would be able to fund themselves through the boomer demographic. The same philosophy applies to the housing supply. I used to wonder who was gonna buy my shit when I was ready to retire along with gobs of other boomers.

I based my predictions back then not on a sick economy- but simple supply and demand features. Plenty of supply, dwindling demand. Each one of us should have had 6 kids. Shitty planning on our parts.

You see, in order to make a profit on your house or your stocks, you have to be able to sell it for more than you paid for it. This is a feature of demand. No demand, no sale. Today, we have the double whammy. No demand and a sick economy that can't support what little demand remains. Houses selling for less than half what they did five years ago and no buyers. But cheer up, we have two more giant tsunamis coming our way. The first is the one trillion dollar student loan debt that will never be repaid. But the more pressing problem, is how are all of these pension plans going to pay the baby boomers the retirement salaries they think they are going to get? The money that was promised to them?

That is an interesting question. You see the bankers ripped you off with the government riding shotgun. You just don't know it yet. Private pension plans are only 77% funded. http://online.wsj.com/article/SB10001424053111903703604576586983549170492.html?mod=markets_newsreel

Interestingly enough that is the same number for public retirement plans. Swiped from public fund survey. http://www.publicfundsurvey.org/www/publicfundsurvey/actuarialfundinglevels.asp

All of these retirement funds, private and public, ASSUME a couple of things. They are called actuarial assumptions or in the new modern day vernacular- complete bullshit. They all assume 7-8% returns and low rates of inflation- generally around 3%. Both of those figures are no longer do-able. There is simply no way that a pension fund, short of gambling and becoming a hedge fund, can make 7-8%. Those days are over. On the inflation side, real inflation is nudging 5% and I am not talking about that bullshit number that the BLS puts out minus food and energy each month.

So the entire retirement world is predicated on 7 to 8% returns, a healthy economy, low inflation, and a demographic that is just dying to pay us more for our houses and investments than we paid. High demand. How's that for a fairy tale? This is what I am thankful for. Thank gawd, I am a retired cop and I was able to get my dough early. I am also thankful I am in the Idaho retirement system which has been one of the cheapest and leanest outfits in all 50 states. They don't even pay cost of living increases that match the manipulated and lowered CPI rates produced by the BLS. They should be able to limp along a little longer than the really bankrupt systems like California and Illinois.

I know this much. I'm glad to be getting some money- while they still have some. Ten years from now...they might be offering giving you 50 cents on the dollar. Tough shitski.

7 comments:

Lisa said...

I was walking my new pup tonight, and I thought about you...

See, I am trying to teach this testosterone enriched dog that I am the End-all and Be-all...An impossible task, I know!

Yet, that's what I continue doing...The IMPOSSIBLE task!

Isn't that what makes this all unworkable? I may tame this pup, but he will never have the illusion of his human counterparts!

The pension money, the "whatever" may be there now, but it is ending...

Six kids? Give me a break!

Why, I have to ask, WHY???

texlahoma said...

I think you've got a pretty good handle on all that. I've been trying to sell a house for over a year now.
I think eventually the gov will grab all retirement accounts, then dole out the money into accounts - when you're old enough - like 70.

conservativesonfire said...

Supposedly they will try to take care of us old farts first. Sorry about you younger guys.

Always On Watch said...

Several local pension funds have already collapsed.

More are on the way.

The federal pension plan is in grave danger. See this, written by a federal retiree:

The rule of thumb is that we draw within two and a half years everything we pay in. To date, I have drawn very close to half a million dollars; if I live another 20 years (which is reasonable), I will draw another 1.5 million bucks.

More at the above link.

Always On Watch said...

I used to wonder who was gonna buy my shit when I was ready to retire along with gobs of other boomers.

Personal note:

I spent some 40 years accumulating stuff (some inherited as I'm an only). It looks as if I'm going to spend the next 10-20 years trying to get rid of this stuff. I offer my stuff to younger family members. For the most part, they have no interest in my stuff because they're busy accumulating stuff of their own!

This summer, I got rid of a lot my "treasured" stuff by throwing it away. I had no other choice!

I have lots more to toss, too. Can't do that while the classes I teach are in session -- in any volume of tossing, anyway.

And I'm not a hoarder, either. But some member of my family has lived in this old house since 1947, and my husband and I since 1982. Stuff mounts up!

Always On Watch said...

related information

davecydell said...

Jim Willie calls it: "The reliance upon Panhandle Doctrine for consumers and Parasite Doctrine for banks has killed the nation."
So damn right on, both ends against the middle.