The Coming Pension Crisis
(And What You Can Do About It)

Dateline: 15 July 2015

A pension is defined as “a regular payment made during a person’s retirement from an investment fund to which that person or their employer has contributed during their working life.” 

Pensions are a relatively modern construct; they have not existed for most of recorded history. Pensions were created in an era of financial expansion and prosperity. That era is coming to a close. It is not coming to a close someday—it is coming to a close right now, in these days we are currently living in.

Pension promises made in the former era of prosperity can not and will not be paid in full. If they are paid at all, the payments will, in one way or another, be reduced.  

If you are putting your future hopes in the promises of a government or private pension plan (including Social Security), you need to listen to The Coming Era of Pension Poverty (click the link). That discussion between Gordon T. Long and Charles Hugh Smith is a sobering reality check.


Two years ago I left a state government job. If I had invested at least 20 years of my life in the job, it would have paid me a pension equal to 40% of my yearly salary. If I stayed more than 20 years, and worked a lot of overtime in the last years, the pension would have paid a lot more. You’ve probably read about the high pension incomes that many retired government employees are making, and that future retirees expect to make.

Some of my co-workers thought I was foolish to turn my back on the future pension income and financial security that is "guaranteed" to government retirees.

But, knowing what I’ve known about the end of the modern era of financial expansion and prosperity, and knowing a little bit about history, I never put much faith in government pension promises.

Maybe I’m totally off base with this. Maybe someday I’ll regret not “doing my time” in the system, and not taking full advantage of the government pension. But, in light of what I believe is a more likely financial reality, I developed a different plan for “retirement.”

If you have concerns about the reliability of the pension schemes you are depending on for your future income (especially after listening to The Coming Era of Pension Poverty), here are my recommendations for contra-industrial “retirement planning”….

1.  Put your hope and trust more in the wisdom and promises of God (and the abilities God has given you) and less in the wisdom and promises of human institutions.

2.  Don’t ever plan on retiring from hands-on financial productivity. 

3.  Start a home business that you can retire into. 

The wisdom of starting a home business to operate in my retirement years came to me by way of an article by Gary North that I read some 16 years ago. It explained the unsustainable future of Social Security (and pension expectations). That article really resonated with me. I already had entrepreneurial inclinations, but Gary North’s article gave me a whole different perspective on long-term home business planning as a way of retirement planning.

4.  Pursue a quality of life and lifestyle that is not high-income dependent. Live well below your means. Avoid debt like the plague. Dream simple.

5.  Spend your time and invest your financial resources in developing and nurturing the often ignored intangible assets of deep-rooted, close family relationships, local-church relationships, and community relationships. Such intangible assets are worth far more than the trappings of material success and a lot of money in the bank, especially later in life.

6.  Establish a productive homestead on a small section of land. Learn skills of self reliance, and establish habits of self reliance that you can pursue into your older years.


As always, I welcome your insights and comments.


Anonymous said...

Many years ago, I realized that as a member of the Baby Boom Generation, I would one day be up a creek without a social security paddle! I managed to build quite an IRA nest egg....BUT, I'm not 59 1/2 years old yet, and I keep kicking around the idea of taking the money out and paying the penalty because I don't think things will hold together another 3 years. It sure is a tough decision!

Other than that, I have developed a pretty good little homestead with an excellent water source, fruit trees, extensive garden, chickens, and dairy goats. That's my true retirement plan...

Elizabeth L. Johnson said...

Dear Herrick, Thanks, thanks, thanks so much for all your blogging. I look forward to it every time I see it in my email! I have thoughts about agrarianism that I figured others would think quite odd. I believe the Lord never wanted people living in a "city", but to be on family farms in communities, in relationships; using God-given skills and abilities for themselves, and to benefit others in community. I presented this idea to a friend, even though I've never heard anyone else but you speak of it. I figure it's a thought outside the norm. This friend was not surprised and said in-fact that agrarianism is how Israel lived, and is how early America was deliberately patterned after Israel's example, to be agrarian. I didn't know that!

Herrick Kimball said...

I think you are a smart person.

Thanks for the comment. I have a Christian friend who STRONGLY disagrees with my thoughts on city living vs country living. And yet, he chooses to live and raise his family in the country.

Anyone who would like to read my thoughts on the subject can do so at THIS LINK

Herrick Kimball said...

I received an e-mail from a reader in South Africa who asked what I mean by the phrase "hands-on financial productivity." I think it might be worth posting my answer here, in case there are others wondering the same thing...

"I think what I meant by that phrase is to continue to be actively involved in productive work that generates some income."

Now here's a small example...

The current issue of FarmShow magazine has a short article about a 106 year old woman in North Dakota who still makes and sells quilts ("She is 106 And Still Quilting Every Day").

"At 106, Myrtle Farrell says she has slowed down. But she still manages to sew about 100 baby quilts a year. The Mapleton, North Dakota, woman always has a few on hand and also makes custom quilts from fabric customers bring her."

The quilts sell for $40 each. Not a lot of money, but, that is beside the point. She is still being productive and creating something of value.

God is a creator and we are made in His image. He equipped us with the physical and mental ability to work and be creative. Doing creative, productive work is something that naturally gives us a lot of satisfaction. That's certainly been my experience, whether it's creating a garden or making chicken plucker parts in my work shop.

I hope everyone can see the beauty of such a thing, and catch a vision for being creative and productive well into old age. :-)

PioneerPreppy said...

The question isn't when will the pension money run out but how long before the rest of us who happened to come along too late for the great "pass the buck to our children retirement scam" can no longer afford to shoulder the burden. Chicago has now raised it's sales tax to 10.25% in order to help pay it's pension promises. That is on top of the other taxes they were already using for them. As long as these entities can generate bond sales they we keep pushing the price off onto generation X on down.

There is also the immigration issue at work here. The politicians will never stop immigration, legal or otherwise, as long as this pension nightmare is staring them in the face. It's the one hail Mary play they got hoping to bring in enough foreigners to pay for all the retirees.

Something tells me this is going to backfire when Juan doesn't want to pay for old White people's retirement anymore.

Farm Hill Gardens said...

Great post! and great recommendations!

Sheila Gilbert said...

Although I have been "prepared" for a long time, I still have a few things that need to be worked out. I'm out of debt, and have no bills other than a few that I choose to keep right now, but will cancel, when it's necessary. (internet, phone, TV) No mortgage, no car payments, nothing. I have a small property that I have been converting to a "retirement" home. My only issue is being able to make enough to pay property taxes way into the future if necessary. I have several years of taxes saved, (very low taxes) however I am sure those taxes will increase in the future. I do have Social Security, and a very small retirement income from my husband, that is ALREADY in trouble. It will not only get reduced sometime soon, it is most likely going to be stopped in the not too distant future. I'm very convinced that both incomes will be "history" very soon, and since I'm handicapped and also old, things will be much different for those of us in my kind of situation. I have prepared for this, however none of my friends or family have. My only concern is the property taxes. I'm self sufficient, other than taxes, and hopefully with the help of my children, we will be able to pay them. My children are tied to house payments, and all other bills, so I'm sure if it goes down, they will be in a mess. So, I have prepared for them also. My question is, do you think that property taxes will increase to the point that we will not be able to pay them? Will income from a skill be able to deal with this? I desire that my children are able to continue, with, or without me, and have a place to live. We do have a few resources that they can offer to others, and the means to carry them out. Although this is the issue that concerns me, my greatest goal right now is, to ask God to help me learn to ENDURE. He tells us to ENDURE to the end, and that is what I desire most right now. He has never failed me, and I know that He will continue to show me what to do.
I hope to be able to move to my property very soon, and will indeed look into what skills are available to us, and start deciding what to do with them. This is the perfect next step for us all. Thank you! Sheila

Bill said...

My wife and I have a saying we like and live by that says, "Desire what you have". We've lived debt free for over 20 years and have been able to help others as a result of that. I wouldn't trade it for anything.

God Bless.

Pam Baker said...

I received a small inheritance when my father passed two years ago. Still trying to sell his house in NC. Have it rented currently.
So I took that money and carefully, logically and very thoughtfully purchased items to build our infrastructure. We told no one that we used up the money as many said, including my 75y/o mother, that with that money in investments, we were set for retirement. I knew it would be pointless to try to explain and it is really nobodies business but our own and most people think I'm a wack job doomsday prepper anyway. I just say nothing.
On another note, I have to tell you that the DeWitt Sun Belt fabric is working well. I will be expanding the garden this fall and will be investing in more fabric. I will say that cutting holes with a cookie cutter and blowtorch is a mite tedious. But shouldn't have to do it again for what, ten to fifteen yearS? Do you ever worry/wonder if the fabric might harbor bad stuff so that productivity declines, sort of like dampening off? Do you wash or treat the fabric after you pull it for the winter?
One more question, the cabana's for your carrots, what are they made of?
Take care Mr. Kimball and write when you can, we miss you when you're busy.

Elizabeth L. Johnson said...

Dear Herrick, your "comment" section is always as interesting as your blog! And yes, we miss your blog when you are busy. I'm glad you have a business to be busy at! God bless you!

RonC said...

Thanks for the reference to Martin Armstrong you gave a few months back:

I too have a pile of money mostly in an ESOP at my place of employ. The only way I can get my money out is to quit. To me, it is all paper for at least another 17 years. I would be disappointed if it all vanished, but The wife's and my backup plan is a 10 acre farmsite south of town.

Realizing that there is a God and HE is in charge has been real comforting lately. I have no clue as to what to do with the retirement fund at work. I would say stay in stocks until mid 2017 for sure according to Martin Armstrong, but what happens to manufacturing (and an ESOP) come October of this year doesn't look pretty. I'm leaving it in God's hands.


Herrick Kimball said...

Pioneer Preppy—
Thanks for the comment. There will be stop-gap solutions but, in the end, the pension system is surely going to break. And there will be all kinds of consequences.

You're another smart person. I think property taxes will increase until a lot of people are forced to sell their homes, but certainly not everyone. If you have no debt to speak of, a small property, are largely self reliant, and have some diversified savings, you are in a very good position to get through the financial crisis, or so it seems to me. Your land and the wise preparations you have made are like an ark for your family. When the rain starts falling and the waters start rising, they will come to your ark. Families working together are the best social support and financial survival system there is. Industrial capitalism has, in large part, destroyed the proper-functioning family, but the coming collapse of industrial capitalism will bring families back together.

Hi Pam—
I'm totally sold on the Dewitt Sun Belt fabric as a versatile, long-term gardening tool. 10 or 15 years of longevity remains to be seen. But I'm fully expecting 10 years at least. I have two rolls in reserve and will transform even more of my garden to the raised bed system I wrote about in the spring. I finally have a large garden that is manageable and will not go to weeds in late July/ August, as has almost always been the case in years past. I don't treat the fabric. I would think that if it is turned upside down as it is used for different purposed walkway and occultation cover), the sun will help to sterilize any pathogens. Cabanas are made of aluminum flashing.

I agree. Lots of great insights come from readers of this blog. I'm glad I'm busy too, but I have so many things on my mind to be writing here and wish I had more time for that. Things should slow down in another month or two.

Herrick Kimball said...

Ron C—
Martin Armstrong continues to be in a league of his own when it comes to economic analysis and forecasting. He's kind of like an alternative to the alternative economists. I find his social commentary interesting too, though, on occasion, I don't agree entirely with it. He has really gone out on a limb with his "Big Bang" 2015.75 forecast. But, as he would say, it's not opinion. We will find out soon enough.

Tucanae Services said...

The sad fact that many won't realize till very late, too late that even if their pension survives and take no hair cut, it is taking one every day thanks to the central bankers. My plan is a small market garden which is already started and a small metal casting skill. Today I look in the stores and a single bell pepper goes for .75c to 1.60 each! Ten years from now they may very well be $5 each.

Herrick Kimball said...

I like that saying. And you are absolutely right in that, in most instances, if someone lives below their means, without debt, there comes a time when they have the resources to share and help others. That's the way it should be, and I can relate to that. Thanks for the comment.

Tucanae Services—
Sounds like a good plan. I don't think a person can go wrong growing food and developing gardening skills as they do so. There is no downside risk. Metal casting is a neat craft/skill that I've always been interested in.

Anonymous said...

What , no where to comment on your newest post about homosexuality ?? Amen to every thing you said , I have not ever heard such an honest assessment of the situation we now find ourselves in ..AMEN Brother !!God bless the honesty and boldness in which you wrote it ! Karen

Anonymous said...

Good bye Herrick, over the many years I've picked up from reading your blog that you were a closeted homophobe and I understand your are welcome to have your opinions, but your latest post is too over the top for me (homosexuals are perverted predators??). The largest number of perverted predators was discovered amongst the very ranks of your beloved church. I could guess at many reasons, other than the brainwashing of the church, for your homophobia but I leave that between you and your God.

I will no longer be reading your blog or buying any of your products. I do hope you really see the light some day.

Anonymous said...

Herrick, I feel completely different than the above reader. I am glad you took a public stand against something the Bible clearly warns against. As far as predators being in the church, yes they are there too. And that is wrong also. We should call sin out wherever it is. Clearly the above reader missed all of the times "over the many years" you stated that you were a Christian agrarian. I am glad to know that you are not afraid to say what the Word of God states. As far as losing a customer...don't worry about that. I will gladly continue to purchase items from you as I have done in the past. And so will MANY others! Having ears they will not hear...Herrick if they didn't listen to Jesus when he walked on the earth, don't expect them to listen to you. You're in good company though: Jesus and me--a majority!! Keep contending for the faith. Sherri

Elizabeth L. Johnson said...

I appreciated your homo-tyranny comments. Thank you for standing for the Truth. You couldn't even have this understanding of this subject if the Lord hadn't revealed it to you. Homosexuality is a sin, just as is lying, robbing, deception, murder, fornication, etc. The perversion is that others will see it is not sin because it "looks" loving, harmless, wholesome, etc. Thankfully we have God's Word on it. He doesn't mince words. Thank you Herrick for not mincing words. And I don't trust the government schools, or Boy Scouts either. In my state of California it is mandatory children be taught from textbooks in the government schools, the benefits of the homosexual lifestyle. I have not researched it, but have heard that "divorce" rates for homosexuals, and also suicide rates are both higher than the national rate, the lifestyle is so detrimental.

Herrick Kimball said...

Thank you Karen, Elizabeth, Sherri and Anonymous for the feedback on my homo-tyranny blog post. I decided to remove the comment option for that post because homosexuality can be such a contentious subject, and I really didn’t want to wade into the quagmire any more than I already have.

Many other readers contacted me by e-mail with their comments, and I appreciate that.

The negative comment from Anonymous is not unexpected. Homosexual activists typically respond with anger and a desire to inflict financial harm on any individual who speaks out against their belief system.

If I worked for some sort of company, they would probably have received numerous irate e-mail or phone calls, and I would have been fired by now. Same thing if I worked for a government agency. If I had a local business, there might be an organized boycott (as the activists did with the local town clerk who I helped).

On the other hand, I don’t wish Anonymous one iota of ill will.

Fare well, Anonymous.

Elizabeth L. Johnson said...

I understand completely.

Anonymous said...

The Powers That Be can, if it suits their purposes, kick this economic can down the road a great deal farther than most would dare imagine.

I well recall reading Harry Figgy's book "Bankruptcy 1995" back in the early 1990's, wherein he described the very-soon-to-be destruction of the American economy with its concomitant impoverishing effects on the populace. Didn't happen; and Harry was a Fortune 500-type of guy.

In the early 1970's there were dire predictions made by numerous prognosticators that the departure of the U.S. from the gold standard, along with the country's declining oil output, would inevitably lead to an economic crash later in the decade, and so impoverish the country that we would ultimately see Soviet tanks rolling down Main Street, U.S.A. Once again, it didn't happen.

Now, there could well be a sudden, economy-ending crash in the near future. My feeling, however, is that it's at least a few years off, if not a decade or more. That said, it seems fairly obvious to me that we have been going through a slow-motion crash of sorts ever since 2008; whether we eventually fall off a cliff, or simply go out with a whimper remains to be seen.

Anonymous said...

Great blog, by the way! :D