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