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.

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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.

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As always, I welcome your insights and comments.