What would you do if your pension were cut by 50%?
A small town in Rhode Island recently did exactly that: cut the retired police chief’s, policemen’s and firemen’s pensions by 50%.
And that’s the same scenario being thrown around by retirement experts for public employees in the wake of the Detroit bankruptcy.
On average, state and municipal employees’ pension funds are only 39% funded and are showing a staggering $4.1 trillion shortfall.
They have $4.1 trillion less than they need to pay all the promises they made to their employees.
Some of the worst are on your screen now, but many more are just barely above this category.
Kentucky, North Dakota, Louisiana, Hawaii, New Hampshire, Mississippi, Alaska, Kansas, Connecticut and Illinois.
And no one has even begun to access how the federal government will pay for all of its promises.
And, as bad as it looks for public employees, the private sector is in even worse shape. Most people will rely almost entirely on Social Security for their income, something in the area of 50% will only have Social Security, and the average check is only $1,250 per month.
The only solution being offered is the same I have made many times here on this segment: increase your financial literacy and take control of your retirement funding.
For many people who are in the late stage of their working life, there are very few options. They do not have the time left to put together any sizable dollar amount. But most workers are still able to save and invest to salvage a decent standard of living in their non-working years.
And keep in mind, for most of us, retirement will mean 15 to 25 years of unemployment. That’s a long time to be broke.
The only viable investment choices that will pay enough now, and in retirement, and give you the safety necessary to avoid losses you will not be able to replace: corporate bonds with solid fundamentals, dividend-paying stocks with a history of increasing their dividends and blue-chip companies.
The options here are also narrowing.
Take a long hard look at how you plan to survive, after working.