Hi everyone, welcome back to Fiscal Friday. This is Bess Byers with A Generation Empowered. Thank you to our new followers on all social media outlets! I feel before we dive into any other financial issues this year, we must address one underreported issue. Sure, $18 trillion in debt is bad, but there’s something worse. It’s called unfunded liabilities.
What are unfunded liabilities? It’s the amount at any given time, in which future payment obligations exceed the current value of funds available to pay them. In other words, you owe money and don’t have the funds to pay it. In America’s case, we owe a ton of money, and don't have the funds to pay it.
Examples of unfunded liabilities are Social Security, medicare and public sector pension plans. It’s hard to estimate our total unfunded liabilities. Numbers range from $75 trillion to $200 trillion. According to usdebtclock.org, and using GAAP, (Generally Accepted Accounting Principles) our Social Security liability is $13.5 trillion, medicare liability is $27 trillion and our total unfunded liabilities are $92 trillion. That breaks out to $789k for every taxpayer.
Social Security is a boondoggle, and according to the Social Security Trustees Report is estimated to run a $68 billion dollar deficit this year. The trust fund we’re paying into, is expected to be empty by 2033. After 2033, how will we pay for these unfunded promises?
If you’ve got a public pension, you’ve got a problem. A 2014 report from State Budget Solutions found state-level public pension plans are underfunded by almost $5 trillion. The top three worst states for pension plans are CA ($754 billion) Illinois ($332 billion) and New York ($308 billion).
Why do unfunded liabilities matter? The payee (you) might not get the money you’re entitled to if the payer (the government) goes through financial hardships. The government has made you a false promise. (Politicians lie!?) You’ve essentially given the government an interest free loan, you may not get back.
Signing off for Fiscal Friday, this is Bess Byers. Remember, it's your generation and you're empowered!