No Help from the State!!

California cities are floundering to pay for the rising cost of public pensions.  Interestingly, the governor of the “Golden State” says, “it’s not up to the state to help.”  Even though most local governments face even greater pressures than the state in meeting promised pension plans, the state government isn’t going to lend a helping hand.[i]  This statement from Governor Brown should scare the daylights out anyone thinking of participating in the private-sector pension plans being considered by California and other states.

Such plans would cover up to 7 million workers in the State of California alone.  Imagine the politicians tripping over themselves trying to access the revenue that such a plan would bring in for them to spend.  And then, long before the workers retire, the money will be gone, just like it is gone for all of the government employees currently.

Of course, California isn’t the worst state when it comes to underfunding their pension plans. That top “honor” goes to Illinois, then Kentucky and Connecticut ranks third in the nation.  In fact, the only state that is 100% funded is South Dakota, according to the Wall Street Journal. [ii]

But don’t overlook the “Overpayment Recovery” that the state of Oregon pulled off a few years back.  In 2006, pensioners were informed that they were over paid for 1999 and that they would have to pay it back.[iii]  After a legal battle, the Supreme Court of Oregon mandated that the funds be repaid. How do you like them apples?  The government makes a mistake, then years later catches their own mistake and penalizes your pension and requires you to pay the taxes on the overpayments.

Over the next 19 years, 10,000 baby boomers will retire every day![iv] Where is the money going to come from to pay for these pensioners plans and their social security?  According to the Social Security Administrations office, Social Security is already $32 trillion underfunded.[v]

To put that another way, the Social Security tax of 12.4% must be raised to 32% to meet current demands and with 10,000 baby boomers retiring daily, who’s going to be working to pay those taxes, as there are less workers working than retirees retiring?

The truth be known, if you don’t start saving today, in a place that guarantees you the ability to keep what you save and at least protect your savings from the negative effects of inflation, you’re going to be hit really hard when pensions and social security are not there for you in the future.

Think of this for a moment, my Dad retired with a pension fund of nearly $80,000 in 1987.  He lived another 30 years but ran out of money about 10 years before he died.  My mother, is now about $4,000 short of the money she needs to live on monthly due to assisted living and medical expenses.  That money has to come from somewhere because government says exactly what the Governor of California is telling every pensioner in California, “Don’t come looking to us, we’ve already spent it all.”

Then there are the 401(k) advocates who actually try to convince you that you can save up enough to live comfortably on in retirement without running out of money.  But historically, on average, 401(k) accounts today have less money in them than they did in 2007.[vi] And with inflation that just isn’t going to cut it.  You will need at least 18% more in your 401(k) today than what you had in 2007 to merely break even.[vii]

Finally, there is participating whole life insurance.  A contract that provides you the guarantees that you need to have so you can be assured you won’t lose any of your money or the gains that you earn.  Something that you can count on so you don’t out live your money.  On top of all that, when you do die, your spouse and loved ones will have plenty to continue on without you.

Stop counting on the government and start learning to depend on yourself by utilizing the historically proven guaranteed contracts found only in participating whole life insurance.  That way you can live your entire life without worrying about running out of money. But you’ve got to start now because it isn’t magic. You can only take out what you put in and the sooner you start the better.

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[i] https://www.newsmax.com/finance/personal-finance/california-jerry-brown-cities-pension/2018/05/14/id/860230/
[ii] https://graphics.wsj.com/table/Connecticut_102015
[iii] http://www.oregon.gov/pers/MEM/Pages/Overpayment-Recovery.aspx
[iv] http://www.pewresearch.org/fact-tank/2010/12/29/baby-boomers-retire/
[v] https://www.forbes.com/sites/kotlikoff/2016/07/17/social-security-just-ran-a-6-trillion-deficit-and-no-one-noticed/2/#5f53b64cd5fe
[vi] CNN Money, July 31, 2007, https://smartasset.com/retirement/average-401k-balance-by-age
[vii] https://www.bls.gov/data/inflation_calculator.htm