Pensions: How Did We Get Here & How To Not Be A Victim

The Wall Street Journal recently published a groundbreaking article detailing the current state of pensions in the U.S. Just because you don’t have a pension doesn’t mean you’re not a part of the conversation. Believe me when I tell you that what’s going on in pensions is a microcosm of what’s going on in personal finance and retirement planning.

It’s time we all shift our mindset into high gear and expect the unexpected. Onward!

Some of the most critical members of our society— teachers, firefighters, military personnel, police officers— are expecting and depending on pensions at the finish line of their careers.

Does that mean these individuals can recline back and expect their pension check to arrive monthly upon retirement? The WSJ says nay.

The crux: The deficit in pensions, or the amount that’s been promised to be paid out, is the size of Germany’s economy. If you’re not up on where countries rank economically, Germany’s is the fourth-largest.

Yikes! That’s cause for alarm and reflection.

Let’s ask ourselves, how did we get here?

Well, it’s been a century of over-promising on the amounts in ironclad pensions. The amounts promised just weren’t sustainable and didn’t take into account the fluctuation of the market.

Traditionally, the strength of your pension has been predicated on where you’ve literally and figuratively paid your dues. The WSJ wants to make everyone with a pension, regardless of private or public, aware of some of the holes in the pension hull, so to speak.

Check out the article for exact facts and figures, but I’ll give it to you straight: The well is dangerously close to running dry. Several states don’t have the funds to provide pensions to its retired employees. How dire is the situation? Let’s look at New Jersey— the state’s pension system has about 12 years of life before it runs out of money.

help! my retirement savings hangs in the balance of a pension!

With certainty, I can share that the truth of the matter is that no one knows what will happen to pensions in America and don’t let anyone tell you otherwise. Instead of speculating beyond the realm of possibilities, this is what we can forecast about pensions:  

  1. Everything could go according to plan and all this worrying is for naught.
  2. It could be reduced and those who planned to live out retirement on one amount will have to seriously recalibrate their standard of living.
  3. Poof! It could all go away.

This might be an unpopular take, but I am remiss if I don’t share: Do not play the victim. If there’s an institution or person in your life who has monumentally dropped the ball, let you down and left you financial ruins, that unfortunate incident is not allowed to define you. Take the power back and make a plan.

Financial planning exists to plan for life’s disruptions. I’m not just referring to retirement, I’m talking the broader scope of life insurance, auto insurance, homeowners insurance, etc. We strategically approach your goals and create a tailor fit plan. Maybe you have questions about saving, investing, or want to share your story of how you overcame a raw deal, drop me a line.