A new U.S. president, hope for a more pro-growth business environment and record highs across the major equity indices have all taken the focus off underfunded pensions.
But this mess hasn’t gone away … not by a long shot.
Take the situation in Dallas, which I began telling you about last year: It remains unresolved and becomes more heated by the day.
In fact, the plan needs a whopping $1.1 billion taxpayer bailout to become only 70% funded!
The bottom line is that the horse has left the barn for the Dallas Police and Firefighters Pension System. And its members will suffer reduced benefits, while taxpayers foot the bill.
How did this happen?
Unrealistic annual return assumptions of 8%.
Underfunded by 55% in early 2016.
- Surge in lump-sum withdrawals.
And the situation in Dallas isn’t an isolated case.
In fact, underfunded pension liabilities are spreading across the U.S. like wildfire.
Even worse, state and local officials are becoming even more desperate as they balance aggressive spending initiatives with surging liabilities.
In Connecticut, the latest work-around shenanigans come from Governor Dannel Malloy: He plans to shift pension costs from the state to local governments.
That’s not a typo: Connecticut plans to off-load its problems to local governments.
Why? Because the state faces a budget deficit for the upcoming fiscal year of around $1.7 billion – and they need the money … bad.
This maneuver would force local governments to raise property and sales taxes to fund $400 million annual teacher pension costs, while also reducing pension benefits.
But that’s not all …
Last month in Ohio, the Cleveland-based Iron Workers Local 17 faced its own pension shortfall. The result: Average benefits cut by 20%.
This had to be done because the plan’s unfunded liabilities were 76% and there were only had 632 active employees to cover benefits of 2,042 participants.
These underfunded liabilities are made worse by politicians addicted to spending – and doing whatever they can to support their habit.
It’s also happening in New York City, where Mayor Bill de Blasio seeks to expand its fiscal budget by a staggering $85 billion.
And the Big Apple is looking everywhere for funding, including Federal funding set aside for Superstorm Sandy. Plus, don’t be surprised if they dip into the $4 billion in reserves of the city’s Retiree Health Benefits Trust Fund.
I could go on, but you get the point: The pension crisis is growing by leaps and bounds. And your money and liberty could be at stake. After all, you can only spend more than you have for so long until you have to pay the piper. And the piper always gets paid.
But don’t forget: In the midst of just about every crisis, there are opportunities of all kinds, including your investments. That’s why now is not the time to go it alone.