I’ve spent the last few weeks diving deeper into the pension mess in the U.S. while researching for the June issue of Boom & Bust, due out to subscribers this week.
And I’ve come to a conclusion. We’re in deep trouble.
Some things are obvious. Puerto Rico, which I didn’t write about because it’s on display for the world to see, will NOT fix its pensions.
In exchange for a stay of execution from creditors, the commonwealth agreed to hand over financial management to an oversight board.
The board rejected the Puerto Rican government’s budget, and then laid out how bondholders could be trimmed, other creditors could be shortchanged, pension benefits could be cut, and work rules revised.
“Great!” the governor said, “except we won’t cut pensions or change work rules.”
Essentially, he’s all for telling creditors they won’t get their money, but he won’t do anything that weighs on his constituents. At least, he says he won’t.
In the end, he won’t have a choice. Pensions will be cut, taxes will go up, and services will dwindle.
That story will be repeated, although not in such a big and ugly way as Puerto Rico, around the U.S. over the next 15 years.
And it should all start about 2024. That’s when Detroit – yes, that Detroit, which already went through bankruptcy once – will have to face an ugly set of facts.
It’s easy to point to states with pension problems (cough, Illinois and New Jersey, cough), but the issues don’t stop there.
Cities, counties, school districts – any level of government entity that levies a tax, most likely has a pension. And many of them have legacy pension problems, where they promised awesome benefits but then didn’t put the money away to fund them.
There’s no free lunch.
We essentially spent years not paying the taxes necessary to fund the benefits that are now coming due.
As taxpayers, we’ll have to make up the difference, and it will cost us.
The price will be our standard of living. The worse off the pension funding is, the bigger the bite (higher taxes and lower services) from the pension sponsor such as a city or county.
And, remember, this is on top of whatever problems we have at the state level.
Oh yeah, and all of this nonsense is happening during the second longest bull market in history. What happens when the economy rolls over?
Which leads me to another conclusion.
I need money. Lots of it. Well, maybe not exactly like that. I need a steady flow of money that I control to carry me through my retirement years in the lifestyle I want to enjoy.
I don’t want to be beholden to any government agency, or be tied to any one state or region. I want to create a stream of income that’s flexible based on my needs, not based on what some other entity can provide.
Except for the very rich, I think that’s a goal we all share.
The financial press is centered on wealth, and a million different newsletters talk about earning a billion percent in just a few hours with no work. That’s nice. But I always wonder, if it’s so easy, why are they spending their days peddling that to me?
Creating streams of income takes time and diligence. It’s why we started some of the programs we have here at Dent Research, and why we continue to look for great investment approaches to add to the mix.
For instance, you’ll be hearing more about Lee Lowell’s Instant Income Secret training session over the next week. Lee’s a new addition to the team, and he’s excited to reveal his unique, consistent income-generating strategy to you for free next Tuesday, May 29.
All you have to do is head to www.instantincometraining.com then, no registration required. As a valued Network member, Lee’s new service will automatically be added to your membership when it goes live.
As you work on building your own streams of income, I highly recommend you investigate various sources, looking for programs and strategies that fit your personal risk tolerance. If you haven’t already, I also suggest you get started immediately.
Every day you wait is a day closer we get to widespread financial issues that will weigh on us for years to come.