Report: 82% Chance California Pensions Are Going Under (and You’ll Be Next)

Report: 82% Chance California Pensions Are Going Under (and You'll Be Next)

Posted By admin On December 19, 2011 @ 4:37 am In Money Watch | 

Mac Slavo
SHTFplan.com ^[1]
December 19, 2011

"Socialism works only until you run out of other people's money."
-Margaret Thatcher

According to a recent study there's an 82% chance that California pensions will run out of money.

Who didn't see this one coming?

Well, my fellow Californians, looks like we're all pretty much screwed.

The evidence: a new study by the Stanford Institute for Economic Policy Research finds that California's struggles with giant pension obligations for state workers is getting worse. Much worse. The report finds that unless reforms are taken, pension obligations are almost certainly going to crowd out non-mandated spending for things like education and social services.

The study, conducted by Stanford Professor Joe Nation along with California Common Sense, covered all three of the state's largest pension systems.

Source: Forbes ^[2]

…

California's pension system is living in a fantasy world where investment returns average 12.5% annually and there's enough money for everyone.

The largest union, CalPERS, has a 82% chance of a budget shortfall in the next 16 years.

Source: Business Insider ^[3]

We've discussed the destruction of pension funds ^[4] before, and soon it will become reality. It's obvious that local, state and federal governments have no intention of cutting spending, regardless of whether that spending is for essential services or discretionary. This means that in order for California (as well as other pension funds nationwide) to keep their funds solvent they need to earn some serious return on their investments. In the case of California that's 12.5% a year. You'd be hard pressed to find a mainstream financial adviser anywhere in the world that could deliver these kinds of gains (unless, of course, they're advising you to buy collapse-proof assets like gold and silver).

And remember, these folks are actually banking on future growth in their traditional paper investments in the midst of the worst economic crisis since the Great Depression. When Europe crumbles, and the dollar becomes a second-rate currency, and it becomes apparent that there will be no real economic growth over the next decade, pensioners expecting to live out their days at a beachfront retirement home will be surprised to learn that their hard-earned retirements have been wiped out.

We suspect, given the global economic climate, that the 16 year time frame for budget shortfall is being too generous. If traditional investment vehicles like stocks and bonds collapse, so too will pensions funds, so we could potentially be looking at just a few years from now before California is unable to make good on their promises.

This is going to affect not just pensions in California, but the entire country, so if you're planning on that money being available when you finally retire you'd better take some steps now, before the whole thing comes crashing down and you're left with a small portion of what you expected would be there.

For those who think they're safe outside of the pension system with their precious metals invested personal 401K's or IRA accounts, consider what the blowback will be when millions of Americans' savings are destroyed. Those who lose everything and have nothing left to lose will take to the streets and demand the government do something.

Politicians will be happy to oblige.

They will, like Argentina, Portugal and other countries have in recent years, come after private retirement holdings.

This can't happen in American, though.

Or can it?

Democrats in the Senate on Thursday held a recess hearing covering a taxpayer bailout of union pensions and a plan to seize private 401(k) plans to more "fairly" distribute taxpayer-funded pensions to everyone.

Source: SHTFplan.com ^[5] - October 2010

It may not be law – yet. But just like the Patriot Act, Patient Protection and Affordable Care Act (Obamacare), and the National Defense Authorization Act, we're willing to bet that the legislation is already written and just waiting for the right crisis in order to be sold to the unsuspecting American public.

Socialism is in its death throes ^[6], but our benevolent wealth distributors aren't done just yet. There are still trillions more left to steal and "share". Make no mistake: They will take it all – until there's nothing left.