No Problem, The Government Is Taking Care of My Retirement

There's a dip in the stock market and you no longer trust those "greedy Wall Street types" whose praises you were singing last year as your 401(k) was flying high? Perhaps you want something guaranteed, like a government pension?

Not so fast.

Many pensions are backed by the Pension Benefit Guarantee Corporation. It insures the pensions of 44 million workers. Just last week it agreed to take up the obligations of bankrupt lumber company Pope & Talbot.

But the PBGC is facing its own problems. The agency last week said it lost $5 billion dollars in stock investments and expects a deficit of $10 to $12 billion this year. It has $68 billion in assets and $83 billion in liabilities.

And there's more.

First, many Americans and politicians have an erroneous view that stocks are for “rich people” and not them. Wall Street remains a mysterious world, operated largely behind closed doors by mad scientist math wizards. The pension problem proves nothing could be farther from the truth. The teachers, cops and other government workers who trust their retirement to companies such as CalPERs may suddenly take a keen interest in equities.

The other reality is that many Americans will have to work longer than planned. Companies and governments may not have the ability to cover costs for people retiring at 62 and living another twenty years. The math of early retirement + living longer / awful stock markets simply will not add up.

And this is in addition to the ponzi scheme of increased entitlement spending.

Will California renege on its promise to me regarding retirement, will it just modify the rules a bit, or will it tap the taxpayers to make up the expected shortfall?