Hopefully you are not relying on the various developed nations’ government promises in the form of pension funds for your retirement plans. This shocking true statement is actually a much-needed dose of reality which becomes clear when you examine U.S. government reports (and those of other developed nations as well) signed by the Secretary of the Treasury himself.
Consider this serious problem. Practically all significant Western world governments are already bankrupt on paper. The overwhelming majority of them have pitifully unsustainable finances on top of that dilemma. Though the United States sets the negative standard in this regard, it is not only an American problem.
The U.S. government boasts over $20 trillion worth of debt and an actual net worth of negative $76.7 trillion per its own yearly government financial report. Just recently, it announced a shocking $1.05 trillion loss for fiscal year 2016. Compared to their own GDPs, the governments of Japan, France, Great Britain, Italy, Greece, and Spain are also not far behind the pitiful finances of the United States.
This helps to explain why the world’s retirement pension fund systems are in a seriously scary financial position. In the United States, this is especially dangerous. Both the Social Security Trust Funds and Medicare Trust Funds annually report that their accounts are dwindling financially. They even know the dates when they will become completely insolvent.
Citibank published an illuminating report on the subject in 2016 called, “The Coming Pension Crisis.” In it, you were warned that the total pension shortfall of the 35 developed nations (as measured by the OECD), which include the United States, Japan, Canada, the United Kingdom, and the majority of Europe, amounts to an eye-watering $78 trillion.
This sum of money is greater than the whole world economy combined. Sadly, the deficits of these systems are growing yearly worse and not better. If only the problems were confined to the major national governments of the world though.
Provincial and state governments, local area governments, and also numerous private firms all share in common massively underfunded pension plans. A huge number of these are burning cash fast, thanks in no small part to the negative real interest rate environment affecting everything in the investment universe from cash-like instruments to bonds.
The Social Security Administration in the U.S. consistently puts out its own discouraging annual report. To quote from their own words:
“Projected [costs] will exceed total income… starting in 2020…Trust fund reserves decline until reserves become depleted in 2034.”
Save the date; you already know when the SSA will run out of money and the majority of retirees in the U.S. will be in serious trouble. Because it is a slightly longer-term issue, practically no private individuals are thinking about or planning for it. Yet the scary truth is that it does not take a genius to see that Social Security likely will not be able to help your retirement portfolio or plans if you are aged 45 or less.
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The demise of the United States’ and major national pension fund systems is going to bring massive upheaval to both world societies and the financial markets. Even if it does not impact your personal retirement funding strategy directly, the impact on the value of retirement account assets the world over will have serious consequences for you.
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