The Unfunded Pension Tsunami Is Rapidly Gaining Momentum. “The U.S. public pension system is mathematically guaranteed to crash!”

It was in October 2008 when I first wrote about my projections regarding the unfunded pensions problems, at that time, “The state of California’s real unfunded pension debt clocks in at more than $500 billion, nearly eight times greater than officially reported.”

You can see that article here: Is Your Pension Plan Safe? Or is it the next big ‘surprise’? Billionaire investor Warren Buffet calls pensions ticking “time bombs.”

A few days ago, it was reported that California’s “unfunded retirement tab for state and local government employees at more than $1.2 trillion.”

My newsletter today is an effort to make sure that you know how seriously screwed up this financial situation is and to STRONGLY encourage you to:

  • A: Immediately evaluate the health of your own pension situation.
  • B: Take steps to ensure that you are not one of the many who will NOT receive the pension you thought you would.
  • C: If you can, move your pension or retirement plan offshore so that your government cannot get hold of it, perhaps by investing your IRA or 401K in income producing Costa Rica real estate?

What could happen?

Public pensions are a slow motion train wreck that can’t be stopped. Millions of workers who expect a steady stream of income when they retire will get nothing. The U.S. public pension system is mathematically guaranteed to crash.

Some states simply promise ridiculously huge pensions to public workers. According to Forbes, the average annual pension promised to a CalSTRS teacher who worked from age 23 to 65 is over $110,000 per year. That’s more than double the average income for an entire family of four in the U.S.”

“Dale Dorsey, after working 33 years, is facing a 51 percent cut to his pension. He’s not facing it alone.

He’s married. Dorsey’s mother lives with them. And, having gotten a late start on a family, so do his children, one in the fourth grade and one in the eighth grade.

“This is just going to cripple my family,” said Dorsey, who was one of 750 retirees and workers who attended a town hall meeting Tuesday in Kansas City.”

I don’t like being the bearer of bad news but: Ninety-three percent of the state’s retirement systems are underfunded, according to Wilshire Consulting’s 2015 report.


Tens of millions of Americans are not going to get the benefits they are planning on! This is an underappreciated trend that will have a profound effect on America’s economy and perhaps on your lives.

“What’s happening to us is a microcosm of what’s going to happen to the rest of the pensions in the United States,” said Jay Perry, a longtime Teamsters member.

I think the report will raise awareness among members of Congress who don’t think this is a problem,” said Karen Friedman, executive vice president of the Pension Rights Center, a Washington-based advocacy organization which opposes the cuts. “Every person I’ve talked to is looking at cuts of 40, 50, 60 and 70 percent in their pensions.”

But Alameda County’s top bureaucrat must be a hard worker because, it seems, she never takes a vacation. In return, when she retires, she’s going to be pulling down a pension that tops half a million dollars a year.

“When normalizing for 30 year careers and taking into account the uptick in retirement benefit formulas that rolled through California starting in 1999, the average state/local retiree in California collects a pension and retirement health benefit package worth over $70,000 per year. For a private sector taxpayer to collect this much in retirement, they would have to save at least $1.5 million. If public pensions weren’t so generous, these pension systems would not face severe financial challenges.”

California’s entire public-sector compensation system is absurdly generous. For instance, the median pension for a recent state Highway Patrol retiree is $98,000 a year–available at age 50, and paid for the life of the retiree and that retiree’s spouse. The median pay and benefit package for a California firefighter is more than $175,000 a year.

As the Orange County Register reported in 2011, the city of Newport Beach had fourteen full-time lifeguards, with thirteen of them earning more than $120,000 a year in total compensation. “More than half the lifeguards collected more than $150,000 for 2010 with the two highest-paid collecting $211,451 and $203,481 in total compensation respectively,” according to the report. These are not aberrations.”

The total value of unfunded government pension liabilities for 20 countries that belong to the Organization for Economic Cooperation and Development is $78 trillion.

Looking at the private sector in the U.S., S&P 500 companies faced pension deficits of $403 billion at the end of 2015. In the U.K., FTSE 350 companies had estimated pension deficits of £84 billion ($119 billion).

Of course the biggest broken retirement funds are at the federal level. Social Security, Medicare and Medicaid liabilities range from $55 trillion to $222 trillion depending on whom you ask. Don’t blame Obamacare though. It only added $17 trillion to the hole.

“It is really a ticking time bomb,” said Charles Millard, Citi’s head of pension relations and former head of the Pension Benefit Guaranty Corporation, the U.S. safety net for private-sector pensions.

“Imagine you thought your mortgage was $440,000 but then the bank called up and said it was $1.3 million. That’s really what we’re facing,” Mr. Millard said.

What will happen?

According to a highly-respected economist Martin Armstrong:

“Between the court ruling and the Obama administration’s push for stronger fiduciary rules,” the developments send a, “strong message that government can much easier seize the pension fund management industry of course to “protect the consumer,” writes Armstrong, warning that the ruling, “sets the stage to JUSTIFY government seizure of private pension funds to protect pensioners,” when the economy gets “messy”.

Please Check To Make Sure Your Pension Fund Is Healthy!

You have a legal right to obtain information about your plan’s funding by requesting the information in writing from your plan administrator. The easiest way is to ask your employer or plan administrator for a copy of the “Summary Plan Description,” or SPD. The SPD will state whether your plan is covered by the Pension Benefit Guaranty Corp (PBGC) program although that is also seriously underwater.

Many union pensions have promised significantly more than they can pay, and the PBGC has guaranteed more than it can insure.”

“If the [multiemployer] fund were to be drained by the insolvency of a very large and troubled plan, we estimate the benefits paid by PBGC would be reduced to less than 10 percent of the guarantee level. In this scenario, a retiree who once received [a] monthly benefit of $2,000 and whose benefit was reduced to $1,251 under the guarantee would see monthly income further reduced to less than $125, or less than $1,500 per year.”

What should you do?

You must take control of your finances and I would strongly encourage you to move a serious portion of your retirement assets out out of your own country and consider Buying Rental Real Estate in Costa Rica In Your IRA or you might consider Using Your Investments To Buy Your Dream House In Costa Rica – IRA’s, 401K’s and Securities Backed Lending.

Now you can can join the thousands of Americans who own foreign properties in their retirement plan. If your heart is in Costa Rica, perhaps it is time that your retirement is as well.

One of our VIP Members John F. wrote to me saying: “Just want to say thanks to you…We have “been on the same page”…for a long time!”

I responded saying: “Thank you John. It’s mind blowing that there aren’t more people on the same page but, if there were, Costa Rica would be a LOT more crowded …. ”

Written by Scott Oliver, author of 1: How To Buy Costa Rica Real Estate Without Losing Your Camisa, 2: Costa Rica’s Guide To Making Money Offshore and 3. ¿Cómo Comprar Bienes Raíces en Costa Rica, Sin Perder Su Camisa?

Scott Oliver's Four Books

Scott Oliver’s Four Books.

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