The Pending Pension Crisis

August 11, 2016

Are we seeing the beginnings of the financial downfall of our country? 

Will there be a pension crisis throughout the states? Certainly there will be in several states-including New Jersey, California, Illinois, and many others that are paying out far more than they have coming in, creating a dramatic unfunded liability.

But one bright spot is Florida. They were also in a bit of a pension crisis; however, they have made huge strides and have had great returns in their pension funds. They have developed a pension system that can now withstand some downturns in the market without impacting those who have worked in state government offices throughout Florida. And here's the interesting part: They have no income tax, yet they manage to be strong from a budgetary standpoint in all they do.

Here's one of the lessons states will learn from Florida: They have never provided comprehensive health care insurance for their retirees. They pay a slight stipend to offset some of the cost, but they are not in the business of supplying health insurance. We will see more of this. Of courseState Pension Crisis, Obamacare will be encouraging it. Obamacare rolls will increase as states begin to drop comprehensive health care insurance for retirees from their plans.

 I do believe we are in a crisis mode in which taxpayers from other states will have to bail out certain states that have reached a point of no return. Since the federal government has bailed out so many in the private sector, it would be logical to believe they will also bail out the pension funds. But we need to ask this: How much can our tax system take? How much debt can our nation afford to take on?

One of the primary reasons this has not happened yet is due to past growth in the markets. But should that turn down below a 6 percent return for any length of time or have negative returns (which is certainly possible), one of two things will happen: These pension funds will have to come up with a solution or retirees will take a huge hit.

If you are a state employee, you need to look at what you are doing to build permanent income as a supplement to your Social Security-unless you are certain your state is one of the strong ones.

Are you involved in local politics? If not, this situation gives you more reason to get involved. Now. It is crucial that we do not have a "tax and spend" mentality in either state or federal government. We need fiscally conservative politicians at all levels of government who understand the fundamental principles of not outspending revenues.

Underfunded State Pensions. If you are a state employee, you need to be concerned, not alarmed - but you do need to take action. You - and other caring citizens - can and should be active in the politics of your state to ensure that you can restore the pension fund to soundness. Even in the states facing the worst crises, the situation is reversible if we are willing to work and make strong, tough decisions.

Many states are facing the same conditions our country faces.Are we seeing the beginnings of the financial downfall of our country? 

Remember this: The failure of any empire or country has always be preceded by moral depravity first impacting the economic soundness of the country and eventually leading to a diminishing of the military might. Have we already experienced the first two steps?

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