The Tip Of The Iceberg Of The Coming Retirement Crisis That Will Shake America To The Core

Posted by on July 23, 2013 in Economy with 10 Comments
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Michael Snyder | Activist Post | Jul, 23 2013

bill_1849489bThe pension nightmare that is at the heart of the horrific financial crisis in Detroit is just the tip of the iceberg of the coming retirement crisis that will shake America to the core.  Right now, more than 10,000 Baby Boomers are hitting the age of 65 every single day, and this will continue to happen every single day until the year 2030.  As a society, we have made trillions of dollars of financial promises to these Baby Boomers, and there is no way that we are going to be able to keep those promises.  The money simply is not there.

Yes, I suppose that we could eventually see a “super devaluation” of the U.S. dollar and keep our promises to the Baby Boomers using currency that is not worth much more than Monopoly money, but as it stands right now we simply do not have the resources to do what we said that we were going to do.  The number of senior citizens in the United States is projected to more than double by the middle of the century, and it would have been nearly impossible to support them all even if we weren’t in the midst of a long-term economic decline.  Tens of millions of Americans that are eagerly looking forward to retirement are going to be in for a very rude awakening in the years ahead.  There is going to be a lot of heartache and a lot of broken promises.


What is going on in Detroit right now is a perfect example of what will soon be happening all over the nation.  Many city workers stuck with their jobs for decades because of the promise of a nice pension at the end of the rainbow.  But now those promises are going up in smoke.  There has even been talk that retirees will only end up getting about 10 cents for every dollar that they were promised.

Needless to say, many pensioners are extremely angry that the promises that were made to them are not going to be kept.  The following is from a recent article in the New York Times

Many retirees see the plan to cut their pensions as a betrayal, saying that they kept their end of a deal but that the city is now reneging. Retired city workers, police officers and 911 operators said in interviews that the promise of reliable retirement income had helped draw them to work for the City of Detroit in the first place, even if they sometimes had to accept smaller salaries or work nights or weekends.

“Does Detroit have a problem?” asked William Shine, 76, a retired police sergeant.

“Absolutely. Did I create it? I don’t think so. They made me some promises, and I made them some promises. I kept my promises. They’re not going to keep theirs.”

 But Detroit is far from an isolated case.  As Detroit Mayor Dave Bing said the other day, many other cities are heading down the exact same path…

We may be one of the first. We are the largest. But we absolutely will not be the last.

Yes, Detroit’s financial problems are immense.  But other major U.S. cities are facing unfunded pension liabilities that are even worse.

For example, here are the unfunded pension liabilities for four financially-troubled large U.S. cities

Detroit: $3.5 billion
Baltimore: $680 million
Los Angeles: $9.4 billion
Chicago: $19 billion

When you break it down on a per citizen basis, Detroit is actually in better shape than the others…

Detroit: $7,145
Baltimore: $7,247
Los Angeles: $8,437
Chicago: $13,355

And many state governments are in similar shape.  Right now, the state of Illinois has unfunded pension liabilities that total approximately $100 billion.

There are some financial “journalists” out there that are attempting to downplay this problem, but sticking our heads in the sand is not going to make any of this go away.

According to Northwestern University Professor John Rauh, the total amount of unfunded pension and healthcare obligations for retirees that state and local governments across the United States have accumulated is 4.4 trillion dollars.

So where are they going to get that money?

They are going to raise your taxes of course.

Just check out what is happening right now in Scranton, Pennsylvania

Scranton taxpayers could face a 117 percent increase in taxes next year as the city’s finances continue to spiral out of control.

A new analysis by the Pennsylvania Economy League projects an $18 million deficit for 2014, an amount so massive it outpaces the approximate $17 million the struggling city collects annually

A 117 percent tax increase?

What would Dwight Schrute think of that?

Perhaps you are reading this and you are assuming that your retirement is secure because you work in the private sector.

Well, just remember what happened to your 401k during the financial crisis of 2008.  During the next major stock market crash, your 401k will likely get absolutely shredded.  Many Americans will probably see the value of their 401k accounts go down by 50 percent or more.

And if you have stashed your retirement funds with the wrong firm, you could end up losingeverything.  Just ask anyone that had their nest eggs invested with MF Global.

But of course most Americans are woefully behind on saving for retirement anyway.  A study conducted by Boston College’s Center for Retirement Research found that American workers are $6.6 trillion short of what they need to retire comfortably.

That certainly isn’t good news.

On top of everything else, the federal government has been recklessly irresponsible as far as planning for the retirement of the Baby Boomers is concerned.

As I noted yesterday, the U.S. government is facing a total of 222 trillion dollars in unfunded liabilities.  Social Security and Medicare make up the bulk of that.

At this point, the number of Americans on Medicare is projected to grow from a little bit more than 50 million today to 73.2 million in 2025.

The number of Americans collecting Social Security benefits is projected to grow from about 56 million today to 91 million in 2035.

How is a society with a steadily declining economy going to care for them all adequately?
Yes, we truly are careening toward disaster.

If you are not convinced yet, here are some more numbers.  The following stats are from one of my previous articles entitled “Do You Want To Scare A Baby Boomer?“…

1. Right now, there are somewhere around 40 million senior citizens in the United States.  By 2050 that number is projected to skyrocket to 89 million.

2. According to one recent poll, 25 percent of all Americans in the 46 to 64-year-old age bracket have no retirement savings at all.

3. 26 percent of all Americans in the 46 to 64-year-old age bracket have no personal savings whatsoever.

4. One survey that covered all American workers found that 46 percent of them have less than $10,000 saved for retirement.

5. According to a survey conducted by the Employee Benefit Research Institute, “60 percent of American workers said the total value of their savings and investments is less than $25,000”.

6. A Pew Research survey found that half of all Baby Boomers say that their household financial situations have deteriorated over the past year.

7. 67 percent of all American workers believe that they “are a little or a lot behind schedule on saving for retirement”.

8. Today, one out of every six elderly Americans lives below the federal poverty line.

9. More elderly Americans than ever are finding that they must continue working once they reach their retirement years.  Between 1985 and 2010, the percentage of Americans in the 65 to 69-year-old age bracket that were still working increased from 18 percent to 32 percent.

10. Back in 1991, half of all American workers planned to retire before they reached the age of 65.  Today, that number has declined to 23 percent.

11. According to one recent survey, 70 percent of all American workers expect to continue working once they are “retired”.

12. According to a poll conducted by AARP, 40 percent of all Baby Boomers plan to work “until they drop”.

13. A poll conducted by CESI Debt Solutions found that 56 percent of American retirees still had outstanding debts when they retired.

14. Elderly Americans tend to carry much higher balances on their credit cards than younger Americans do.  The following is from a recent CNBC article

New research from the AARP also shows that those ages 50 and over are carrying higher balances on their credit cards — $8,278 in 2012 compared to $6,258 for the under-50 population.

15. A study by a law professor at the University of Michigan found that Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States.  Back in 2001, they only accounted for 12 percent of all bankruptcies.

16. Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.

17. What is causing most of these bankruptcies among the elderly?  The number one cause is medical bills.  According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States.  Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.

18. In 1945, there were 42 workers for every retiree receiving Social Security benefits.  Today, that number has fallen to 2.5 workers, and if you eliminate all government workers, that leaves only 1.6 private sector workers for every retiree receiving Social Security benefits.

19. Millions of elderly Americans these days are finding it very difficult to survive on just a Social Security check.  The truth is that most Social Security checks simply are not that large.  The following comes directly from the Social Security Administration website

The average monthly Social Security benefit for a retired worker was about $1,230 at the beginning of 2012. This amount changes monthly based upon the total amount of all benefits paid and the total number of people receiving benefits.

You can view the rest of the statistics right here.

Sadly, most Americans are not aware of these things.

The mainstream media keeps most of the population entertained with distractions.  This week it is the birth of the royal baby, and next week it will be something else.

Meanwhile, our problems just continue to get worse and worse.

There is no way in the world that we are going to be able to keep all of the financial promises that we have made to the Baby Boomers.  A lot of them are going to end up bitterly disappointed.

All of this could have been avoided if we would have planned ahead as a society.

But that did not happen, and now we are all going to pay the price for it.

This article first appeared here at the Economic Collapse Blog.  Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here.

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  1. Have you looked at the CAFR for these city governments ( er, corporations that can be found on Dun & Bradstreets website). Many states and cities have been hiding billions off budget in their CAFR’s.

    • sarahterwilliger1970@countermail.com' Sarah says:

      Kalifornia comes to mind. But we have to ask ourselves why the states holding these funds refuse to voluntarily liquidate these funds?

      Simple fact is, these state governments (and fedgov most of all) think it’s them against us. They have feathered their nest at the public expense and they have come to believe they are superior to the taxpayer.

      The various levels of government screwing the old-timers are going to find out what a really, really bad mistake that is.

    • gsgundo@comcast.net' Greg says:

      That is very true. They tax people to death and mislead the public because they dont want us to know about the comprehensive annual financial review or cafr

  2. robert.klinck@gmail.com' bob klinck says:

    Why would anyone assume that an accountancy system designed by a fraternity of elitist bankers will not deliver all power into their hands. As Williiam Aberhart so rightly said, ‘If you haven’t suffered enough from the effects of this system, it’s your God-given right to suffer more.’

    You say that the money necessary to avert disaster just isn’t there. Why not?

  3. thelightforest453@hushmail.com' SanGabe says:

    Anyone who believed that promise of resources in some future time, falls under the “buyer beware” maxim, and has long been known to be a foolish enterprise.

    But in America, Ignorance is bliss, and those “new deals” sure do shine, until the rust starts appearing.

  4. legaljudicialblogs@gmail.com' Joe Adam says:

    This article is more fear porn.

    Our resources are only limited by our ingenuity.

    There is no shortage of anything except applied intelligence, political courage and will.

    The boomers are moving into retirement at exactly the right time.

    In retirement, they will consume less while society re-sets to the new technology.

    Many boomers will choose and have chosen to die young.

    The medical system will assist them. Medicine is the greatest killer. Medicine kills more than warfare.

    Intelligent young (and old) Americans know that in the future we will rely on looking at nano-technology, 3-d printing, solar power, aqua-ponics, re-engineered money, teleportation.

    The oil industry is over.

    The great sucking sound you hear is the death rattle of the oil industry.

  5. joe-sally.foug@comcast.net' Joe F. says:

    This article describes symptoms, rather than a causes.

    If the United States nationalized the private Federal Reserve banking cartel, it could redirect the $85 billion per month it has been spending to prop up bank assets into meeting pension obligations and rebuilding the country’s infrastructure without the usurious cost of interest.

    If the United States overhauled its taxing policy to reward and protect domestic producers it could provide employment and living wages for Americans. What a novel idea!

    If the United States stopped provoking wars all over the globe, it could redirect trillions of dollars per year to peaceful development.

    Don’t think your way into a dystopia nightmare. Wake up and look at the obvious possibilities. Many articles like this have been written to convince you that austerity is an economic necessity. It isn’t. It’s a policy choice that favors an elite class of predatory capitalists. Use your mind. Think for yourself.

  6. kgillette@yourcoach.com' kg says:

    “The money simply is not there.” Not so. Social Security can meet all current obligations until 2038.

  7. abinico@gmail.com' abinico warez says:

    Tax the rich. Tax Wall St transactions. The rich have tons of money – that’s why they are called the rich – DUH!

    • hrty@saearet.com' Henry says:

      You mean feed the beast with yet another tax? Any tax is passed on to the people. The rich don’t pay taxes! That’s why they ARE rich, – DUH! Surely you’ve read at least one of the many articles about huge corporations earning billions and paying zero taxes.

      The answer is to starve the beast and give it no more of the people’s money. Cancel all taxes so the people can keep their money and enjoy their wealth. No nation has ever taxed itself to prosperity. Stop asking for more taxes! YOU will be the one to pay those new taxes, – not the rich! The income tax got started as a tax only on the rich. Who pays it now? YOU do!

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