We might get through the next 50 years without living in caves, scavenging in the ruins in supermarkets or actually eating our elderly, but avoiding all that will be tough.
If you're rich, and you don't have your wealth hidden in some very secure form on some very, very well-hidden island: Governments will find ways to tax it, no matter how loyal you are to the Tea Party and no matter how much of a crime against humanity that you think taxation is. If some reasonably orderly government does not take away a portion of your wealth by taxing it, hungry people with pitchforks will find some other way to take all of it that they can get.
If some employer, government program or insurance company has promised you that you'll be getting glorious (or, at least, stable) post-retirement benefits from about 2025 on, and you think you're going to get the exact benefits promised, in a form such that the inflation-adjusted value of those benefits is roughly comparable to what the current inflation-adjusted value is: Uh, right. Sure.
I can believe that developed world life insurers, annuity issuers, disability insurers and long-term care insurance (LTCI) providers will find ways to meet their obligations, in nominal, un-inflation-adjusted terms.
The U.S. government may print enough cash to meet its obligations, in un-inflation-adjusted terms, and maybe find some way to actually keep people alive in real, folks-have-to-eat terms. But the next few decades are likely to be challenging.
Now the U.S. Governmental Accountability Office (GAO) has done a report, required by the Postal Accountability and Enhancement Act of 2006 (PAEA), on U.S. Postal Service efforts to pre-fund its $94 billion in accumulated retiree health benefit liability, as required by the PAEA.
To its amazing credit, the Postal Service has actually put enough cash into the Postal Service Retiree Health Benefits Fund to cover about 49 percent of the retiree health benefit liability.
The fund is supposed to cover benefits for about 471,000 current retirees and for about 528,000 current employees. The fund does not cover future hires.
The Postal Service is now $11 billion behind on fund payments. It's supposed to contribute a total of about $34 billion to the fund by 2017. Meanwhile, in the age of the Internet, the Postal Service is having a hard time sustaining revenue, let alone coming up with free cash to meet the retiree health benefits funding obligations.
Some of the proposed "solutions" would just dig the hole deeper, according to Frank Todisco, a GAO actuary, and Lorelei St. James, a GAO director.
If the Postal Service stops prefunding, uses what's left in the fund and otherwise pays as it goes, the fund will be empty in 2026.
On the one hand, the reality is that, unless something wonderful happens to the economy, the retirees and future retirees are not going to get the benefits promised.
It's time to cry, scream, apologize, cry some more, and acknowledge that, no matter how zealously we follow the advice of Machiavelli to kill all of the rich people, take their money and win support by giving the money to the survivors, we don't have enough rich people to make good on all of the country's post-retirement health benefits obligations and post-retirement obligations.
Let's cut our losses and figure out how we'll use the resources we're likely to have to meet the survival needs our society is likely to have, and stop figuring out how we'll run things in Purple Pony Magic Land.
On the other hand: It was pretty mean for folks to promise those benefits without being able to meet the obligations, and meaner yet to shaft people by formally breaking the promises.
On the third hand: If we could (OK, this is not possible, given what's going on in Washington, but, if we could) work together to start planning now, in a kind-hearted but practical way, maybe the gap between what's promised and possible is narrow enough that the country's retirees could come out of this with a reasonable quality of life. Maybe not quite what they expected, but not what they might fear.
On the the fourth hand: Given how fantastical the idea of "working together" sounds, maybe, realistically, the best retirement investment is not gold, but tools that could be used to find cans in the ruined supermarkets…
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