Promise Made, Promises Broken…Featuring Michael Douville

MichaelEcclesiastes 5:5 It is better not to make a promise than to make one and not keep it.

How does a City, County, State, or large Industry balance a budget or keep the P/E Ratio in Bonus range? The solution is simple: promise huge Benefits in the distant future.  Just sell the sizzle and promise a rosy future while hoping for the best; a Pension Ponzi Scheme!  Further enhance the story, with results calculated on gains that justify expectations. The Day of Reckoning was far in the future, political and executive terms would expire and someone else would be blamed. Now, Baby Boomers are retiring at the rate of 10,000 per day and are looking to collect. The Day of Reckoning is upon us!

Through mis-management, mis-allocations, possible fraud, or just bad luck, most Pensions in America are dangerously under-funded. The Capital inflows from working members are below the outflows to Retirees in an unsustainable rate.  Illinois, downgraded by both credit institutions was able to pass a budget and avoid Bond “Junk Status”. The Legislator decided to eliminate a $900 million dollar contribution to the Pension Fund! A Great Reset is coming! Those Promised are knocking at the door to collect.  How can a City Worker, Policeman, Fireman, etc., retire at 70% of their last year’s pay which was surely stuffed with all the overtime, vacation pay, and sick days possible and receive benefits payable for LIFE! Then hire a replacement at 100% pay to do the job of the retiree. Unsustainable! Unbelievable!

Pensions benefits will not be fully paid; retirees will not receive the Income they were promised.  These retirees faithfully followed the rules; their retirement was guaranteed. They paid mortgages, car loans, and schools tuition; but not IRA’s or Rental Properties. The Teamsters Mid-States Pension recently petitioned the Federal Government to reduce benefits by 60% to avoid a bankruptcy. Many retirees monthly payments were cut from $3300/month to $1300.  No Golden Years for Mid States Retirees! More dire is the Local 707 Teamsters Pension which has filed for Bankruptcy.  Reduced monthly payments are sent by the Pension Benefits Guaranty Corporation. PBGC is itself struggling under the weight of collapsed Pension Funds and may not survive.

In the next Recession, large Corporations, Cities, Municipalities, and maybe even States will be unable to service obligations. Retirees will be severely impacted. Those with “Benefits”, innocently and faithfully counting on “Others” to fulfill promises, did not personally prepare for their own future. The Retirees will be the first to be sacrificed. They did nothing wrong, they were Lambs to the Slaughter!!

There is still a little time to prepare; consult your Financial Adviser.  Review the Asset Allocation and consider placing a good portion of the funds in Real Assets; or cash flowing conservative entry level homes which will mitigate a downturn due to the consistent immediate Income component.  No longer can you trust the goodwill of others; your Destiny must be in YOUR hands!

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