Freep: It's time for Gov. Snyder to appoint an emergency manager for Detroit

[Cincinnati_Kid]

Most of these pensioners retire at 50 and live another 20-30 years. If you cant live comfortably on $27,000 get a damn job or don't retire.

You're about as out of touch as YOUR Governor. $24,000 per year is the poverty line.

[Wesley Mouch]

How do you figure $27,000 per year is a comfortable pension to live on? Is this some "new math" I'm not aware of? As high as things are especially here in Mich [[taxes, insurance, gas etc..), $27,000 a year is peanuts.

The debate shouldn't be about whether $27,000 is peanuts. Its not great. But once your house is paid off, one can live nicely on that. I have two relatives retired from GM who are making less than that and are doing just fine. You need less money in retirement than in working years, as a general rule. But again this is a sideshow.

The real question is whether anyone needs a pension that is more than three times the poverty line. Do you think anyone needs a tax-free pension of more than $75,000, and if so, why?

[kenp]

You're about as out of touch as YOUR Governor. $24,000 per year is the poverty line.

My governor? I work for a living, I am over 50 and I still have kids at home. My point is if you don't want to make a pension salary then work. Pensions were meant for retired people to live out their life. Today people are retiring at 50 and expect to live just as comfortably as when they were working. Believe me I know many of them. That's the Michigan way right. And then working people have to pay your way while you bitch about what the state is doing to you.

[Wesley Mouch]

My governor? I work for a living, I am over 50 and I still have kids at home. My point is if you don't want to make a pension salary then work. Pensions were meant for retired people to live out their life. Today people are retiring at 50 and expect to live just as comfortably as when they were working. Believe me I know many of them. That's the Michigan way right. And then working people have to pay your way while you bitch about what the state is doing to you.

Fair enough. There's no good reason that our elected officials allowed pension agreements for retirement at young ages. [[I have a relative who is retired at 45.) The public wouldn't likely have voted for it, if they had even been asked, and especially if they'd been shown what the public cost per resident would be under actual market returns. What happened instead is this was agreed to out of the public eye, based on optimistic market returns, and then not funded. This is nothing much short of thievery. It should make everyone's blood boil.

Nothing in this statement is intended to suggest that any public servant doesn't deserve a defined benefit pension, based on their term of service, at a reasonable percentage BELOW their average inflation adjusted earnings over their working life after they are over 65 years of age. [[And if they're police/fire with difficult fields, I'm OK with them moving to administration to work on, say, tax returns when they're older.

[Cincinnati_Kid]

My governor? I work for a living, I am over 50 and I still have kids at home. My point is if you don't want to make a pension salary then work. Pensions were meant for retired people to live out their life. Today people are retiring at 50 and expect to live just as comfortably as when they were working. Believe me I know many of them. That's the Michigan way right. And then working people have to pay your way while you bitch about what the state is doing to you.

This isn't a question about whose working. I work as well, but for you to suggest that a $27,000 pension is enough to make ends meet is ludicrous. Heathcare alone will eat up most of it, if they haven't saved enough money besides their pension. Pensions were created for people to live out the rest of their years on, besides savings. My parents did it. They didn't work another day after retiring. It's not the case now, due to financial mis-management by corporations, government entities and cities. I'll probably have to keep working well into my 60's, and NOBODY is paying my way.

[corktownyuppie]

This isn't a question about whose working. I work as well, but for you to suggest that a $27,000 pension is enough to make ends meet is ludicrous. Heathcare alone will eat up most of it, if they haven't saved enough money besides their pension. Pensions were created for people to live out the rest of their years on, besides savings. My parents did it. They didn't work another day after retiring. It's not the case now, due to financial mis-management by corporations, government entities and cities. I'll probably have to keep working well into my 60's, and NOBODY is paying my way.

I am a professional financial advisor. While in some parts of the country may be more difficult than others, a married couple in their 60s, each earning a $1200 social security income plus a $2,000 pension with fully paid for home and no speial circumstances, is able to live a fairly comfortable retirement including some discretionary travel and spending without too much effort.

While certainly personal preferences and spending habits dictate the feasibility of this, I will say that I have clients with savings of almost zero to over $1-2MM who are able to live solely on 2 social security payments and a pension income in cities like Ann Arbor, Plymouth, Novi, Brighton, and Grosse Pointe.

And while yes, I do agree that mismanagement and changes in corporate culture are factors in the disappearance of pensions, I believe it to be factually incorrect to state that as the main reasons.

Generally speaking, the loss of pensions as a middle class benefit was driven by two simultaneous changes in modern living:

[[1) The lifespan of corporations shortened. At the time General Motors and Ford were offering "30 years and out", it was quite feasible for a corporation to survive and exist for the next 30 years and beyond. Sure, changes took place, but they took place slowly enough that corporations were always able to stay ahead of the curve or drive the change itself.

Fast forward to today. The iPhone you were using 3 years ago is either a dinosaur now or will be 12-24 months. Today's Facebook is tomorrow's AOL.

[[2) The lifespan of humans lengthened. At the time social security was first introduced in the early 20th century, less than 50% of the population lived long enough to see 65. Even fewer saw 70.

Fast forward to today. A married couple, each aged 65, has a 100% chance than one of them will see 90 years old.

=====================

When you combine the fact that most people are living 20-25+ years in retirement along with the fact that it's harder to forecast whether or not a company will be here in 30 years, you can see that the pension system itself as our parents knew it is simply unsustainable in the modern era, just like leather helmets won't cut it in the NFL, halfcourt shots in the NBA are no longer worth 2 points, and whether you like it or not, you're putting on a helmet if you want to play hockey in the NHL.

And then, from a long-term historical perspective, remember that pensions the way our parents/grandparents knew them were an experiment, an innovation of their time. This is not some tradition that goes back centuries and centuries. It was a new invention that only goes back 2 generations at most.

While yes, for most people 2 generations is an eternity, we have to remember that for centuries and centuries they didn't exist. And that while I loved the invention while it worked, for it to work today would be ignore the realities of arithmetic.

I'm not saying that people should have to work until the day they die. I'm saying that the world has changed. Manual labor is no longer the way of life, and 62 years old is no longer the day of sleeping 12 hours a day and being afraid to use the stairs.

[mwilbert]

Do you think anyone needs a tax-free pension of more than $75,000, and if so, why?

I don't know whether anyone does, but why would the pension be tax-free?

Fast forward to today. A married couple, each aged 65, has a 100% chance than one of them will see 90 years old.

If you believe that, you should be buying your clients more joint annuities. However it isn't true. The odds are about 45%.

see https://personal.vanguard.com/us/ins...etirement-tool

[Novine]

The claim that the pension concept is only two generations old would be news to the veterans of the Civil War who received pensions for their military service.

http://www.usnews.com/news/blogs/was...l-war-pensions

Aside from the history of pensions, there's no reason a properly funded pension plan can't outlive the company.

[Wesley Mouch]

...<snip>...
Aside from the history of pensions, there's no reason a properly funded pension plan can't outlive the company.

Well, I suppose that's true. But possibility doesn't always translate to reality.

Private defined-benefit pensions are pretty well funded. Public defined-benefit pensions less so. There's little reason to concern ourselves with private defined-benefit pensions. Few if any are being established today. They're mostly a relic of the past now. Employers today are much more likely to establish a defined contribution plan [[ala 401k). We'll see how much of a mess that is in the future.

In the public sphere, it appears that 'properly funded pensions' are about as rare as honest politicians.

The reason there are few properly funded public pensions is because the people who have to fund them have other ideas about where to spent that money. You can fund a pension, or you can hire a police officer or teacher. One choice is praised. The other never noticed.

"I promise you a 100% fully funded pension plan for the Wazuki School System. Its really important, so we're going to reduced teachers salaries by 15% and increase average class size to 50. And we'll increase your taxes by 20%. It'll be tough, but its the right decision for our hard-working retirees."

That'll get you elected.

[Cincinnati_Kid]

I am a professional financial advisor. While in some parts of the country may be more difficult than others, a married couple in their 60s, each earning a $1200 social security income plus a $2,000 pension with fully paid for home and no speial circumstances, is able to live a fairly comfortable retirement including some discretionary travel and spending without too much effort.

While certainly personal preferences and spending habits dictate the feasibility of this, I will say that I have clients with savings of almost zero to over $1-2MM who are able to live solely on 2 social security payments and a pension income in cities like Ann Arbor, Plymouth, Novi, Brighton, and Grosse Pointe.

And while yes, I do agree that mismanagement and changes in corporate culture are factors in the disappearance of pensions, I believe it to be factually incorrect to state that as the main reasons.

Generally speaking, the loss of pensions as a middle class benefit was driven by two simultaneous changes in modern living:

[[1) The lifespan of corporations shortened. At the time General Motors and Ford were offering "30 years and out", it was quite feasible for a corporation to survive and exist for the next 30 years and beyond. Sure, changes took place, but they took place slowly enough that corporations were always able to stay ahead of the curve or drive the change itself.

Fast forward to today. The iPhone you were using 3 years ago is either a dinosaur now or will be 12-24 months. Today's Facebook is tomorrow's AOL.

[[2) The lifespan of humans lengthened. At the time social security was first introduced in the early 20th century, less than 50% of the population lived long enough to see 65. Even fewer saw 70.

Fast forward to today. A married couple, each aged 65, has a 100% chance than one of them will see 90 years old.

=====================

When you combine the fact that most people are living 20-25+ years in retirement along with the fact that it's harder to forecast whether or not a company will be here in 30 years, you can see that the pension system itself as our parents knew it is simply unsustainable in the modern era, just like leather helmets won't cut it in the NFL, halfcourt shots in the NBA are no longer worth 2 points, and whether you like it or not, you're putting on a helmet if you want to play hockey in the NHL.

And then, from a long-term historical perspective, remember that pensions the way our parents/grandparents knew them were an experiment, an innovation of their time. This is not some tradition that goes back centuries and centuries. It was a new invention that only goes back 2 generations at most.

While yes, for most people 2 generations is an eternity, we have to remember that for centuries and centuries they didn't exist. And that while I loved the invention while it worked, for it to work today would be ignore the realities of arithmetic.

I'm not saying that people should have to work until the day they die. I'm saying that the world has changed. Manual labor is no longer the way of life, and 62 years old is no longer the day of sleeping 12 hours a day and being afraid to use the stairs.

Very well done. I agree with most of your post except the 100% percent chance of someone living to 90. I think it's far less than that.

[corktownyuppie]

If you believe that, you should be buying your clients more joint annuities. However it isn't true. The odds are about 45%.

see https://personal.vanguard.com/us/ins...etirement-tool

Mea culpa. Should've fact-checked.

Egg on my face.
CTY

p.s. main point still holds true....life expectancy is way longer today than 50 years ago.

p.p.s. Novine is right about fully funded pension plans are able to survive long past the company. Laws that allowed company to raid overfunded pension plans to be used for health care created a big mess. When you have a good year with your investments, that doesn't mean you get to take your profits and add new expenses. You need to hold them there for when the down years come.

Then when corporations were required to show their pensions as corporate liabilities, that created incentives to cut pension benefits to create earnings.

What should have really happened is that they should've put up a giant wall between the pension accounting and the corporation's accounting. Once money went into the pension bucket, no fair going back to it for loans or other expenses. At the same time, cutting pensions would then no longer affect corporate profits and vice versa.

Of course, you create new problem with that, too. I'm not sure what the solution is, to be frank. But I do think that the current way of doing things has real problems as well.

[corktownyuppie]

Also, I differentiate between government pensions vs. corporate pensions vs. municipal pensions. With government pensions, you can essentially do what you want [[with consequences, of course) because you can print your own money.

Government pensions go back a long way. I think it might even be before the Civil War.

[mwilbert]

CTY

p.s. main point still holds true....life expectancy is way longer today than 50 years ago.

Yes and no. Life expectancy at birth since 1940 [[I thought I'd give you 20 extra years) has gone up a lot, about 15 years. Life expectancy at age 65 hasn't gone up nearly as much. It was 12.7 for men in 1940, and 14.7 for women. Now [[2009, last year I found data from the CDC) it is 17.6 for men, and 20.3 for women, so roughly a third as much.

Not insignificant but not a game changer either. The problem with pensions isn't primarily demographic.

[Wesley Mouch]

Yes and no. Life expectancy at birth since 1940 [[I thought I'd give you 20 extra years) has gone up a lot, about 15 years. Life expectancy at age 65 hasn't gone up nearly as much. It was 12.7 for men in 1940, and 14.7 for women. Now [[2009, last year I found data from the CDC) it is 17.6 for men, and 20.3 for women, so roughly a third as much.

Not insignificant but not a game changer either. The problem with pensions isn't primarily demographic.

It may not be the biggest factor, but a 51% increase in life expectancy at retirement age will come close to a 51% increase in inflation adjusted payments.

For every single retiree, we will pay more than 6 years of benefits.

Life Expectancy for men:
1940: 12.7
2000: 17.6 [[38% increase)
2009: 19.2 [[51% increase)

A game changer to me. Of course not the only issue. Its never single issue, is it.

But clear that we should move the retirement age from 62-65 to 68-71 -- the day after I retire.

[313WX]

BTW, when Snyder had his press conference regarding the financial review, he insisted that the goal needs to be for Detroit to grow its population in the long term to survive.

What exactly did he mean by that, because lord knows no one's moving into Detroit given the lack of basic services that will be available?

Was he hinting at merging Detroit with the suburbs once the city's finances are resolved?

[Novine]

What else is he going to say? The track record of the financial managers is that even the ones that balance the books still leave behind communities that are unattractive to new residents and businesses. Incompetence and mismanagement may be part of the reason that these communities fall under control of an FM but most have terrible fundamentals that even the best leaders are going to be hard pressed to fix. Look at Detroit, if you force the city to live on the current revenue, you'll have to get rid of things like parks and recreation, cut core services like police and fire and have nothing left to invest in capital improvements. That's no plan for success.

[mwilbert]

Life Expectancy for men:
1940: 12.7
2000: 17.6 [[38% increase)
2009: 19.2 [[51% increase)

Of course the relative importance of this change is debatable; I just wanted people to realize that the change wasn't as big as "change in life expectancy since 1940" might imply.

Also, your 2009 number isn't right. 17.6 is the 2009 number. 19.2 is the all persons number, not the number for men.

[Honky Tonk]

BTW, when Snyder had his press conference regarding the financial review, he insisted that the goal needs to be for Detroit to grow its population in the long term to survive.

What exactly did he mean by that, because lord knows no one's moving into Detroit given the lack of basic services that will be available?

Was he hinting at merging Detroit with the suburbs once the city's finances are resolved?

Maybe he was quoting Forbes magazine.

[Wesley Mouch]

What else is he going to say? The track record of the financial managers is that even the ones that balance the books still leave behind communities that are unattractive to new residents and businesses. Incompetence and mismanagement may be part of the reason that these communities fall under control of an FM but most have terrible fundamentals that even the best leaders are going to be hard pressed to fix. Look at Detroit, if you force the city to live on the current revenue, you'll have to get rid of things like parks and recreation, cut core services like police and fire and have nothing left to invest in capital improvements. That's no plan for success.

The EFM/EM/bankruptcy is a plan. Its a terrible plan -- except as they say for all the others. What's your plan? And how would you fund your plan? There's no cash.

[Novine]

Of course there's cash. How much is being skimmed off the city revenue stream to go to the DDA and fund Demolition Jackson's DEGC activities? Tax abatements? Enterprise zones? Stephen Henderson was hand-wringing in the Freep the other day about why the rest of the city can't be like downtown and Midtown. If the revenue that those areas actually supported other parts of the city instead of being funneled back into the latest downtown demolition or handouts to Mike Ilitch, maybe there would be funds to pay for police and fire elsewhere in the city.

[Eber Brock Ward]

How much is being skimmed off the city revenue stream to go to the DDA and fund Demolition Jackson's DEGC activities

Those developments are likely one of the few revenue *generators* that the city has. Take away the incentives before we hit a critical mass, and development stops/backslides. Instead of the city getting something [[taxes and other incremental revenues like parking, sales tax sharing, etc. minus any abatements and incentives), the city wouldn't even get the revenues in the first place. Zero dollars, because no tax-paying citizens are there, without an abatement is still zero dollars.

The soul of this city is poisoned by an "if I can't have it, neither can they" mentality, even when the program in question makes everyone better off than they would be, were the program not in place.

[Honky Tonk]

Those developments are likely one of the few revenue *generators* that the city has. Take away the incentives before we hit a critical mass, and development stops/backslides. Instead of the city getting something [[taxes and other incremental revenues like parking, sales tax sharing, etc. minus any abatements and incentives), the city wouldn't even get the revenues in the first place. Zero dollars, because no tax-paying citizens are there, without an abatement is still zero dollars.

The soul of this city is poisoned by an "if I can't have it, neither can they" mentality, even when the program in question makes everyone better off than they would be, were the program not in place.

Fine. Show me how the People Remover, Comerica Park, Hart Plaza, The Riverwalk, Dequindre Cutoff, Ford Field, or any of the other "Grandeose" projects over the last years have improved my lifestyle in the City? How have they improved anyone's lifestyle in the City? [[barring of course Mike Ilitch, Matty Maroun, etc.). The population continues to dwindle, and with it the tax base. Last year was the highest murder rate since 1987, crime is rampant, services are close to non-existent, and now the battle cry is "we need to fund People Remover II running down the center of Woodward, and a new hockey stadium". Is this IT for real this time? Will THIS be the one to start the change? When I'm done paying for THESE, will Detroit FINALLY be on the upswing? I don't think so. 5 years from now on Detroit/MI State YES!, we'll be discussing the latest rash of shootings, and whether or not the population will hit 300,000 in the NEXT 5 years.

[aj3647]

I never really understood what the bribes had to do with the city's budget problems. Is it shameful? Yes. But name me one governmental agency that doesn't overpay on contracts! Detroit is hardly unique in that regard. We pretty much accept that the politicians in Washington get constant kickbacks. You think big cities are any different?

Corruption in places like Chicago has been tolerated in the past because at least they got shit DONE. Services were still provided, things were accomplished, even if some palms were greased along the way.

That's what makes Detroit different. The dysfunction. Detroit's leadership is not only criminally-corrupt, but also lazy and incompetent. That's where Chicago has Detroit beat. Chicago's corrupt politicians can still run a city and accomplish things, Detroit's cannot.

[Wesley Mouch]

Of course there's cash. How much is being skimmed off the city revenue stream to go to the DDA and fund Demolition Jackson's DEGC activities? Tax abatements? Enterprise zones? Stephen Henderson was hand-wringing in the Freep the other day about why the rest of the city can't be like downtown and Midtown. If the revenue that those areas actually supported other parts of the city instead of being funneled back into the latest downtown demolition or handouts to Mike Ilitch, maybe there would be funds to pay for police and fire elsewhere in the city.

I suppose there is cash. What was I thinking. There's no problem at all.

[kenp]

These posts are getting more comical by the minute.
And what the hell is the Dequindre cutoff?