Personal Finance and the Financial System

[meta-agnostic]

I apologize if this topic has been addressed before, but surely it has gained new importance with recent events.

I have a pension with a Midwestern U.S. state institution that I have the option to cash out. Of course it's been in the back of my mind for some time to just go ahead and do it, but with all of the political goings-on in various states and the talk of unfunded pensions becoming a prominent issue, I'm starting to think right now might be a good time.

I know I have to make a decision about this based on my own circumstances, but I'm curious what people think are important criteria in making a decision like this. Is it possible that on the other side of whatever our near-to-medium-term future holds, obligations like this will still be honored in some form? It seems like a really secure asset to have as long as the system hold, but if the system is not going to hold then it makes sense to make everything liquid or tangible ASAP. What do you think the window is between pension systems collapsing like dominoes followed by the whole (at least fiat) financial system domino? Less than a year from beginning to end seems likely, possibly much shorter if intervening events take a toll. Still, it might be enough time to stock up on more precious metals and survival supplies if one is focused.

I know this is a good problem to have, but it's still one that very much takes the whole issue from theoretical to making very real long term life decisions based on an uncertain future. But at some point if we are serious we have to be willing to put our money where our mouths are.

 

[EmeraldHope]

meta-agnostic,

Let me preface what I am about to say with the fact that I am not an expert. I do have a background in finance , though. It is my opinion, it is not a matter of if, but when, the system will collapse, or at the very least morph into another system. There are more derivatives outstanding ( bad bets ) than there are assets and capital to cover them, globally. It is the 800 pound gorilla in the middle of the room. The pensions and the insurance companies are all heavily invested in them, as well as state and municipal governments. Nothing can improve until this is addressed, and then you would either have mass write downs and corporate bankruptcies, or mass dollar injection into the system like we see with QE 1, 2, 3 etc. It is a house of cards. For the companies to do the write downs, they would have to admit they are insolvent, which would not be good for the elite at the top at all.

I at the very least would suggest, as I did to my grandmother, to put at least 20% into physical precious metals, and some more into goods you will need that may become unaffordable due to inflation getting out of control. That at least would give you a cushion, and a safety net, as you watch events unfold.

 

[meta-agnostic]

Thanks EmeraldHope.

I know this thing is going to blow one way or another just based on the way it is set up, even if the earth changes are not completely apocalyptic. I am somewhat diversified right now although I don't have exact percentages. I was telling people about precious metals years ago when they were mostly dismissive. Now I have to work on my external considering not to give off too much "I told you so" smugness. I'm working on various necessities but my situation right now is probably not what you would call well-prepared for Mad Max times. Then again, things are still relatively normal right now from where I sit and there may still be important experiences left for me to have under these circumstances. I'm guessing that to get from where I am now to somewhere halfway sensible is going to require cash, and when some sign comes along telling me "OK, this is it, go time", it will not be a great time for filling out forms and waiting for things to process so I should probably just go ahead and do it. Still, it's a big decision, almost a "point of no return" type of thing.

 

[meta-agnostic]

Let me add another angle just to see if I'm making sense. Assume I do not immediately need the cash to prepare or I can get it from other sources, which is debatable, and I keep the pension through the "changes". The pension is with the state university in my hometown and moving back there from the East Coast megalopolis is high on my list of options if things look like they will become untenable here. Assuming everything hasn't turned to rubble or ice, is it possible a situation could arise where I could say, "Look, because of this pension you owe me (or "I am owed" if there's no one in particular to say it to) X amount of shelter to live in and/or land to farm on?" It's likely a measly amount anyway as far as land/shelter is concerned and I know all of this is extremely 3D-centered thinking, but does that sound reasonable or completely ridiculous?

 

[anart]

Let me add another angle just to see if I'm making sense. Assume I do not immediately need the cash to prepare or I can get it from other sources, which is debatable, and I keep the pension through the "changes". The pension is with the state university in my hometown and moving back there from the East Coast megalopolis is high on my list of options if things look like they will become untenable here. Assuming everything hasn't turned to rubble or ice, is it possible a situation could arise where I could say, "Look, because of this pension you owe me (or "I am owed" if there's no one in particular to say it to) X amount of shelter to live in and/or land to farm on?" It's likely a measly amount anyway as far as land/shelter is concerned and I know all of this is extremely 3D-centered thinking, but does that sound reasonable or completely ridiculous?

I think in the last few years it's been proven time and again that there is no guarantee to any pension. In short, if things get that bad, you aren't owed anything at all - at least that is how it has gone for many people thus far. The pension just 'goes away' - so I think you might be engaging in some wishful thinking to think that you'll ever be able to have a 'you owe me' conversation with anyone, if things collapse. fwiw.

 

[axj]

If you have the option of converting your pension money into precious metals, I would definitely do it. At least for the short term, it is one of the best ways not to lose everything when the dollars and maybe other currencies too become worthless.

Another thing that has been discussed here (http://cassiopaea.org/forum/index.php?topic=21375.0) is that the price of food will probably go up significantly this year or next. It may even become out of reach for many people. So that is another thing to consider for short term.

 

[Lindenlea]

Meta-agnostic,

There are no long range financial forecasts on my list anymore, for me a bird in the hand is my motto.

My only advice, if you did cash in your pension and buy some precious metals, would be to buy them in small lots, i.e. 1oz, 2oz, 5oz as they would be easier to trade if and when you need to. Find a good spot to hide them too, I have friends with 'stuff' buried on their lands - just in case.

 

[Ca.]

Meta-agnostic, like anart said there are no grantees in life, everthing can and is subjset to change without a moments notice. Cash out and then ask yourself the following very big questions. Is your roof over your head secure? Meaning is it payed off, and free and clear of outstanding debt? Do you have a car payment, or need a new car that may fit the coming crunch on the future of oil, by the manipulation by the lunatics of this commodity.

As oil begins its climb due to uncertainty in the middle east ( just an excuse by the greedy mentally ill manipulators ) food will become even more expensive, as will the cost of living. Stocking up on the essentials, just like your going to a remote cabin for very long time where there are no stores.

Like EmeraldHope also said, there is strong possibility that the U.S, currency could very well collapse do to the on going world debt that everyday struggles to afford the interest payments let alone trimming it. "The National Debt" is at a wooping $14.1 Trillion as of 20 February 2011.

And they just keep printing more and more paper. The same paper you hold, in your cash out.

It would be important to research your options, consider debt, think about what would have value if the system goes south and how will or does that affect you and your family.

The best to you, as this is a hard nut to crack, so think wisely, and consider networking with others in the same situation, may be of benefit.

--- "Deficit" vs. "Debt"---www.federalbudget.com

Suppose you want to spend more money this month than your income. This situation is called a "budget deficit". So you borrow (ie; use your credit card). The amount you borrowed (and now owe) is called your debt. You have to pay interest on your debt. If next month you don't have enough money to cover your spending (another deficit), you must borrow some more, and you'll still have to pay the interest on the loan. If you have a deficit every month, you keep borrowing and your debt grows. Soon the interest payment on your loan is bigger than any other item in your budget. Eventually, all you can do is pay the interest payment, and you don't have any money left over for anything else. This situation is known as bankruptcy.

Each year since 1969, Congress has spent more money than its income. The Treasury Department has to borrow money to meet Congress's appropriations. Here is historical deficits chart.

Budget 2011: Video: What Does The Federal Budget Freeze Look Like?

http://www.youtube.com/watch?v=_Rl1xgT3REE

 

[Mike]

I think unless you use the pension to pay monthly bills then getting while the gettings good and taking the cash out is what I would do. The finaincial system is jacked up and it is a matter of when it comes apart - could take some time though as I thought it would be done by now with what is happening with QE 2, etc.

 

[meta-agnostic]

Thanks everyone for your thoughts. I think I had just about made up my mind already before posting but I needed some help thinking it through. I wish I could talk it over with family but I would probably get lectured about being rash and unstable or something. Maybe once it's already done I'll be able to have that conversation.

A little more background: I wouldn't be able to retire for another 25 or so years so yeah, keeping the pension doesn't really make sense. I have just myself to worry about right now but I have family I know I can stay with if things get tough. They are, however, roughly 1000 miles away right now. I rent, so some kind of relocation in the coming months seems almost inevitable. My car is pretty small but fuel efficient. I like to think I'm ready to face all of the upcoming possibilities but I'm a little anxious about everything on a personal level. I know if things were to really heat up I would probably not be able to stay in my current setup for very long, but I have a stable job right now and I don't know what to do. I could just bail and move away and maybe find a job in a more quiet setting, or there might even be some rural land I could try and live on but that still seems extreme at this point. I could wait for circumstances to force my hand, but why wait to deal with things under duress when I know well enough to get a head start? I guess many of us are dealing with some form of decisions like these right now.

The stuff about the university "owing me" land for the pension is just sort of a sociological thought experiment. Assume there is some form of stabilized society a couple decades into the future but everything has been rearranged. Maybe we've won the battle in that psychopathic influences in government are recognized and dealt with. In a community where people deal with each other on a face-to-face basis and some form of fairness is thought to be honored, and assuming a big university campus would not have all the stuff it has going on now, then why wouldn't it make sense to distribute things of value to people based on the work they put in? Even work they put in during the "old times"? When I actually type it out it sounds about as equally crazy and worth betting on as assuming everything will continue as it is now and planning on collecting an annuity at normal retirement age.