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Is There a Pension Fund Crisis Looming?

No, actually it's already here. Are you planning on receiving a pension from your former employer when you retire?

Have you checked on the health of that pension fund lately? After all, it's your money, right?

Remember, you could have been paid that money at the time you actually earned it, instead of allowing your employer to set it aside and, uh, manage it for you, right?

And you let them do that anyway? Why? Because you trusted their ability to grow your money for you more than you trust yourself? Or your financial planner? Or your brother-in-law?

Remember Enron? Enron had a pension fund. Like most large companies, Enron also had highly paid bean counters down the hall from the worker bees out in the cubicle farms—accountants and planners who managed Enron's employee retirement and pension funds. These guys were trustworthy, right?

So guess where 100% of Enron employees' retirement pension savings were invested? That's right, in Enron stock. Something to do with team spirit. Talk about a lack of diversification!

When Enron went under, so did its pension fund. Weeping retirees without a pension were seen on C-Span, testifying before a Congress that looked genuinely sympathetic, at least some of them.

Of course, there is a world of difference between sympathy and empathy. Congress already has their own guaranteed pension fund, so they're pretty much set for life. And it's not very well diversified, either. 100% of its stock is held in a single basket called the U.S. taxpayer. Congresspersons will receive a healthy stipend every year for the rest of their lives, just for having sat in Congress. Ditto the President.

That's funny, Thomas Jefferson never got that when he was president. In fact, the Sage of Monticello died broke. We have an original copy of an 1826 Virginia newspaper listing many of Jefferson's personal and household items being sold in an auction on the grounds of Monticello just to settle his debts.

Jefferson argued that a successful citizen should enter public service for a brief period, serve his country without remuneration, and return to the private life from whence he came.

Thom used to walk to work, too, from his rooming house on Pennsylvania Avenue. Private citizens would stroll alongside and express their views on the power, duties and responsibilities of the executive branch. My, how things have changed.

Fast forward to the present: it seems as though many American companies never quite recovered from the 'Tech Wreck' of 2000 and their pensions funds are now, dare we say it, under funded.

Question: How can an under funded fund be a fund at all?

But that's OK because you would expect a fully matured welfare state to have a government program to step in and rescue under funded pension funds, wouldn't you? And you would not be disappointed to know that Uncle Sam already thought of that.

It's call the Pension Benefit Guaranty Corporation, another quasi-governmental organization that is, oops, in the red. It seems as though the PBGC will need its own bailout though, because it's apparently $23 billion in the hole.

Not to worry! This will merely require the printing of another $23 billion dollars to cover the shortfall. But, wait a minute. If the government can (and does) simply print all the money it needs to pay its bills, for this or any other reason, why does it bother to tax anyone? Must have something to do with controlling inflation.

Here are two excellent articles you can read about the pension crisis, although perhaps not right before bed time:

:: The Coming Pension Crisis
:: Time to Tackle the Pension Crisis

... and here's a very good web site to help you evaluate the safety of your pension --> KnowYourPension.com

But if it were up to us, Dear Reader, we would see if any pension, 401(k) or other tax-deferred retirement program could possibly be converted to a self-directed IRA.

We would then manage it ourselves in a nice, balanced portfolio of natural resource, emerging markets and precious metals stocks and mutual funds.

Like this one --> To see how we've been doing in the markets lately click here.

We teach these principles in thorough detail in Two Steps To Wealth.

By the way, Congress just voted itself another pay raise back in July 2006. Click here for the story.