Running Out Of Money, is your pension secure?

[Jack Peterson]

2 minutes ago, Mike In Canada said:

I will retire very comfortably in the Philippines.

 Nice to hear I wish you well 

[Mike J]

4 hours ago, sonjack2847 said:

I think that a lot of the problem is that there are too many people who don`t work who could.The UK government took money from the pension fund and spent it

That is exactly what the USA has done.  To make it even worse, what was initially initiated as a means to supplement income for people with no pensions, it has morphed into a multifaceted benefit heavy program and is now the "primary" income for people who have no pension and/or IRA and were unable to save a "retirement nest egg" for any one of a number of reasons.  The USA is expected to have benefit payments exceed the social security revenue coming in the not so distant future (currently projected to be 2034).  At that point an estimated 79% of benefits will be covered by incoming SSA tax revenue.  You can only kick that can so far down the road and the further out you make changes the more painful those changes will be for both the people paying in and the people receiving benefits.

[davewe]

There's actually about three or four things in life I have control over but US Social Security isn't one of them. I choose to make the assumption that it will continue, though I realize it's quite possible that rules and amounts will change over the years. Since the number of old cranky people increases annually in the US, I'm guessing the government will have to placate them.

Now as to corporate pensions, that's different. I worked for a Fortune 500 company that offered a small pension. I did not trust them as far as I could throw them, so instead of taking the monthly payment, I took a lump sum that I manage. Of course I could screw that up too but at least I don't have to depend on my former employer.

[Jack Peterson]

3 minutes ago, Mike J said:

  You can only kick that can so far down the road and the further out you make changes the more painful those changes will be for both the people paying in and the people receiving benefits.

Mike can I ask if you can expand on this, I don't see my pension as a benefit but and Earned old age salary am I to understand that your SS is a benefit and not a pension. Sometimes I think we can get hold of the wrong end of the Stick when we see the word Benefit, We in the UK only get from the state a UK age related pension ( + whatever privates we have, and our Military pension (if served) We get absolutely Nothing in benefits from the UK and have lost most of them by living here. If we return ( we would have to re-apply for all) so I just wonder, Sorry if this puts you on the spot 

[davewe]

27 minutes ago, Jack Peterson said:

Mike can I ask if you can expand on this, I don't see my pension as a benefit but and Earned old age salary am I to understand that your SS is a benefit and not a pension. Sometimes I think we can get hold of the wrong end of the Stick when we see the word Benefit, We in the UK only get from the state a UK age related pension ( + whatever privates we have, and our Military pension (if served) We get absolutely Nothing in benefits from the UK and have lost most of them by living here. If we return ( we would have to re-apply for all) so I just wonder, Sorry if this puts you on the spot 

I'm sure Mike will have a more thoughtful answer but this is in fact a pretty controversial topic in the US. As I approached retirement I got lots of comments from younger co-workers who believed (and have been taught) that they will be paying for our Social Security benefits. I would politely remind them that in fact I had put into the system for my own benefits and that the sum a retiree gets is determined based on how much he put into the system.

Of course it's more complex than this and once the government stole the Social Security surplus and never returned it, it has caused lots of angst for both the recipients and those still working. And it was made even worse by the fact that Social Security also pays for other things that are not pension related (disability, children's benefits, etc.)

[Jack Peterson]

2 minutes ago, davewe said:

And it was made even worse by the fact that Social Security also pays for other things that are not pension related (disability, children's benefits, etc.)

Yes I can understand that, in the UK we pay what is called National Insurance to a Gov Department called the Department of Health and Social Security who in turn fund the DWP the Department of  Work and Pensions but here is the thing as with the US I guess, How much is paid to the DWP and how much of Our money goes towards the Scroungers and the ever increasing amount of Refugees/asylum seekers who had never paid to those that never paid what they will be getting or those that will get yet never paid in a Lot. It is I think one of those never ending Stories of Gov lies and deceit. Luckily I am now in my 5+ years of retirement and have the sort of pension Contract that only an empty pot can Stop. 

Just hope it will not empty too soon 

 Luckily again, our Military Pensions are not in this Pot they are Funded by the Defence Budget that although Shrinking, My last communication with them tells me we are still well covered. As I have had now 24+ years on this pension, I think I have done well, another 10/15 years should not Break them EH?

[Mike J]

11 minutes ago, Jack Peterson said:

Mike can I ask if you can expand on this, I don't see my pension as a benefit but and Earned old age salary am I to understand that your SS is a benefit and not a pension. Sometimes I think we can get hold of the wrong end of the Stick when we see the word Benefit, We in the UK only get from the state a UK age related pension ( + whatever privates we have, and our Military pension (if served) We get absolutely Nothing in benefits from the UK and have lost most of them by living here. If we return ( we would have to re-apply for all) so I just wonder, Sorry if this puts you on the spot 

When the program was initially established (1940) it was, in fact, what you describe as a pension.  For the sake of brevity I will call them benefits in the remained of the post.  You would pay in taxes based on your earnings, and collect the benefits when you retired.  They started out on the wrong foot by allowing people who retired shortly after the program was enacted to collect benefits even though they had paid little or nothing into the program.  The thought was that a LOT of money was coming in and LITTLE going out because the ratio of working to retired was quite large, especially in the early years.   That ratio dropped from 41 workers to 1 retiree in 1945 to 4 workers for every 1 retiree in 1965.  The current rate is 2.9 workers per retiree and getting worse.

Then the problems grew and grew and grew:

Benefits became more generous and expanded from the concept of pension to a true benefit.  A "minimum" per month amount regardless of how much was paid in.  Expanded to include SSI payments for disability.  There are many many law firms that specialize in grabbing these benefits with some paying doctors to declare otherwise healthy individuals as disabled.  Additional payments if retired and you have children under the age of 18, or 21 (I think) if still in college.  You can almost double the benefit if you have two children living at home in your retirement years.  There are quite a few US expats who are able to take advantage of this when they have children here in the Philippines (or other countries).  The program was then expanded into Medicaid to cover healthcare during retirement.  Again benefits grew and grew until cost of benefits far exceeded the dollars coming in from Medicaid taxes.

The taxes coming into the retirement system were not invested.  Some were paid out as benefits and the remainder were "loaned" to the government to make the budget look balanced.  It looks more balanced because the US government does not recognize this as a national debt (go figure).  In essence was has happened is that the program turned into the largest ponzi scheme in world history and is ongoing.  Currently there are still more SS dollars coming in than going out but again that will change in 2034 at the current rate.  Like any ponzi scheme when expenses exceed income the scheme will collapse under it own weight unless something changes.

In short it was a program with good intentions that grew totally out of control in the income/outgo ratio, and the government  has compounded the problem by taking the excess and replacing it with IOU's that are not shown on the ledgers as debt.  The problem has gotten so big that politicians are afraid to address it on either the tax and/or the benefit side.  So they just keep "kicking the can down the road." 

[Jack Peterson]

2 minutes ago, Mike J said:

Then the problems grew and grew and grew:

 Sounds a bit like we are all in the same boat when it comes to any of our Governments then?

The bubble has to burst and some stage, I hope I am not around when it does 

[Clermont]

I agree with what is written, and without putting politics into the subject, when Labour started our superannuation fund it was a bit messy to start with, then a treasurer by the name of Peter Costello for Liberals saw the writing on the wall. Super was fine for the younger generation but Australia still had a deficit of over 250 million a year for pensions, government employers and for older workers and current pensioners. Now knowing they couldn't stay in power for ever, he started a future fund, very sound and couldn't be raided by future governments of all sides. They also increased the retiring age by 2 1/2 years seeing everyone was living longer. Now I'm not sure what happened to that 120 billion he'd salted away when Labour came into power, but naught is mentioned about it nowadays.

Maybe Governments of many nation treat their countrymen like mushrooms, keep them in the dark, feed them bullsh==, and they'll keep the country prospering.

Anyway by the time the thirties arrive, if I've still got a grip on the perch, I'll be dribbling and won't give a bugger. 

[Tukaram (Tim)]

I have a County retirement that has got to be safer than any bank fund, I think.  My job was no big deal, but the fund is a State wide fund full of judges and politicians.  They will not let it fail, for their own sake ha ha.  It is guaranteed by law not to make less than 7%.  Back at the end of the Bush years when everything crashed - I was still earning 7%. 

Nothing is for sure, but since so many politicians are in the same fund I am, it is about as safe as you can get.