Broke in Retirement: This Could Be a Stark Reality

Rachel Gearhart By Rachel Gearhart, Managing Editor, The Oxford Club

Retirement Planning

Just before Christmas, the California Public Employees’ Retirement System (CalPERS) quietly made a bold move that got our attention.

America’s largest pension fund voted to lower its expected rate of return from its investments to 7% by 2020.

And other pension funds will likely follow CalPERS’ lead.

But it’s just a Band-Aid on a gaping wound…

Last year, there was a $1.3 trillion gap between pension obligations and funding.

By the end of this year, that gap is expected to grow to $1.8 trillion.

Right now, the average annual return “assumption” for the pension industry is 7.62% – a tough mandate in a low-interest world.

But even if all states cut their expected rates of return to 7% right now – forcing states to contribute more cash to the coffer – we’d still have a $1.2 trillion gap.

The problem is state and local policymakers aren’t willing to contribute more. Instead, they’re relying on investment returns to close the gap.

Clearly, it’s not working… That $1.8 trillion burden will eventually fall on all taxpayers, workers and, worse, the folks who rely on the promises of a pension.

And we’ve seen this kind of crisis before…


In 1996, Canada realized its Canada Pension Plan (similar to U.S. Social Security) would be completely bankrupt by 2015.

And the Canadian government did something drastic to stop the bleeding…

It took the bureaucracy out of retirement funding.

According to the CPP website, the investment board operates under an “investment-only mandate… unencumbered by political agendas and insulated from political interference in investment decision making.”

Its objective is simple: Use the public market to help Canadians achieve liberty through wealth in retirement.

And it’s well on its way. In fact, the CPP fund is expected to quadruple by 2040.

Clearly, Canada is onto something.

And so far, the CPP has worked out well.

That said, the CPP isn’t perfect. The program relies on a lot of “ifs” to work properly.

For example, the chief actuary of the CPP states that the fund is sustainable at its current contribution rate for the next 75 years… if it earns 4% annually on its assets.

Yet the average annual growth rate of the Canadian economy over the past 47 years is just 1.8%.

It’s also not an apples-to-apples comparison with U.S. Social Security. American retirees tend to see a much higher payout – and pay more cash into the system – than their neighbors to the north.

But the moral of the story is this…

Canada recognized the problem and did something to fix it. As did CalPERS.

We need to do the same. Otherwise, retirees in the U.S. will see much of their hard-earned money squandered by the system.

Oxford Club Chief Income Strategist Marc Lichtenfeld says, “If government doesn’t come to the rescue, it will mean a reduction in benefits to retirees. They’ll have to adjust their lifestyles to adapt to lower income.”

Counting on the government for your liberty is never a good idea. Investors must prepare for the worst and save for their retirement privately.

Marc states, “I strongly recommend anyone in the workforce save hard and invest for retirement even if they ​have a pension or expect to receive Social Security.”

As always, your money is safest in your own hands. Take the bureaucracy out of your retirement.

To get started, Marc says, “Invest for the long term with Perpetual Dividend Raisers and reinvest your dividends. That way, when you’re retired, they will generate a high level of income for you.”

Helping retirees establish healthy, reliable, regular income streams is something Marc’s passionate about. If you’re interested in setting up a secure portfolio of Perpetual Dividend Raisers, click here.

Good investing,

Rachel