Pensions and pension system
The government pension system
There are government pension systems that are constructed in the way that the employee of today is paying a percentage of their salary to a pension system. Most people think that this money will be saved, invested and managed for their own benefit, so that when they retire they get to collect this money as pensions.
That is not the case!
The money saved into government pension funds today is used to pay out the pensions to the retirees of today, and not being saved for the pension some time in the future for the employee saving the money today. And that creates some problems.
Government pension funds is not working
In the USA, President Franklin D Roosevelt signed the Social Security Act in 1935, starting a more organized government pension system than the more private alternatives that existed since 1875.
In 1935, 42 people were paying for the pension of 1 retiree. Today less than 2 people are paying for the pension of 1 retiree.
And it is the same in most countries. Not only the US.
And it is getting worse….
Government pension funds will run out of money
Most certainly, if you still have a few years until retirement, there will be no government funded pension for you to collect when you retire.
They will have run out of money!
In Sweden, Great Brittain and other countries, government officials has - inofficially - stated that the current system will soon run out of money. And we may assume the situation is the same in other countries. Have you ever asked yourself why countries raise the retirement age?
Two reasons for decrease value in government pension funds
One of the reasons that government pension fund system does not work is that the number of people that need to be covered by the system increase all the time. We are simply more and more people on the earth, and for each year, more and more people retire.
Another reason that the government pension fund system does not work is, that in order to compensate for the growing number of inhabitants in the country, the government tries to increase the value of the pension funds. The government invest, or speculate if you will, with the money, placing them in stocks and bonds. Since stocks and bonds sometimes decrease in value, active management of these assets, often result in a real decrease of the pension fund value, instead of an increase. There are examples of pension funds actually going bankrupt.
Continue by reading our article about how private pension funds and retirement insurance is one solution Read More
Read our article about that you need to save and invest yourself to have money for retirement Read More
Are you looking for a secure and steady job or income - read this article about false security Read More
Do you currently have a secure job and don't save or invest for your future - read this article about the 40-40-40 system Read More