Pensions on Target to Fall of Fiscal Cliff

The pensions in the United States, United Kingdom, Japan, The Netherlands, Canada, Australia, China and India will have a projected unfunded liability of $428 Trillion dollars by 2050. That figure does not, and I repeat does NOT include health care costs.

Why is this a major piece of information?

First, this is only 30 years away. Contrary to what you may think, that is not a long time. That is barely enough time for you to prepare for the eventuality that these governments will not be able to keep their retirement promises.

Second, the situation will only get worse as more and more people retire and their longevity increases, the required funding will need to increase. In a world where discretionary dollars are at a premium, additional funding to the pensions is not likely. If they don’t get the funding they will have to increase returns. Where is it possible to increase returns? Most analysts are predicting lower long term returns in the stock market coupled with low interest rates for the foreseeable future. So increased returns look unlikely.

What then is the only other alternative? Governments must reduce or completely eliminate benefits. That is not the musing of some insane blogger. It is a mathematical certainty.

Let me explain: The unfunded liability of pensions, according to this report is over $428 trillion. The Gross Domestic product for the entire planet is $75 trillion. That is the measurement of the total output of goods and services of the entire planet. Let me be clear in order to meet the projected unfunded liability we would need to use all of planet earth’s output for almost six full. Everything else would simply be put on hold, including food, shelter, and other conveniences. Most likely everyone would be dead because the world’s GDP was used to offset unfunded pension liabilities instead of eating.

Do you think there will be higher taxes? Do you think benefits will be lowered? Do you think Governments will print more and more money, further reducing the purchasing power of that money? My bet is all three will be employed in a futile attempt to shore up the pensions. But in the end, they will still not be able to provide the full promised benefits.

I hope there will be some sort of solution found that is more agreeable that what I have described. But in the meantime, I am hoping this information will inspire all the grandmas and grandpas in America, and the world for the matter, to leverage their assets. By doing so, they will be able to give their children and grandchildren a fighting chance in the future.

A few questions to consider:

Are your pensions immune to this problem?
When are you going to start preparing?
Where do you start?
Who can help you to leverage or assets without the potential to lose those assets?

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