Retirement Benefits Going Forward

[Novine]

You're right, I'm going to favor a system that actually benefits workers versus a system rigged to benefit the financial sector sold under the phony catch-phrase of "personal freedom!" If you're going to side with the skimmers and scammers on Wall Street, at least be honest about it.

[Locke09]

The ultimate problem with a "pension" system, as opposed to a set-aside savings program, is that no one can predict how many taxpayers or employees or whatever will be around to pay into it in the future. Regardless of your political preference [[I detect a lot of "rights of the little guy" soft-core socialism in responses to this thread), it is completely illogical to put your money [[and faith) in a system that has no predictable future. A pension system is literally structured like a ponzi scheme. As long as more people keep putting in, it works fine. But populations can shrink, along with employment numbers and tax bases. Most people would not actively choose to build a house on loose sand. It's not stable. And no one entity [[certainly not government; very many municipalities and states across the country are in dire financial straights) can stabilize a pension. If both the worker and the employer payment occur in the present, there is no debt obligation awaiting a generous and prosperous set of people in the future to pay it.

The pension system is no more of a Ponzi scheme than the stock market [[where your 401k and pensions are invested). In theory a pension that is properly funded as it is earned, as all pensions are supposed to be, is not dependent on current employees. It is dependent on a stable tax base only to the extent that payments, as earned must be funded in the year they are earned and shortages need to be made up during down markets. But, that is a far cry from being "literally" a Ponzi scheme. They are not unsustainable if companies and government entities stop using clever ways to raid them or withhold funding from them.

If the tax base is not stable, than you have problems whether or not you have a pension to pay.

[DetroiterOnTheWestCoast]

Very strange for Mike to say "it is completely illogical to put your money [[and faith) in a system that has no predictable future." That is EXACTLY what a defined contribution 401[[k) plan invested in the market is.

[Wesley Mouch]

Defined benefit pensions are great -- so long as the company or government offering them is well managed -- and has the discipline to worry about the future -- not just the present.

Defined contribution pensions are great -- so long as you have the discipline to save and invest wisely.

I think as a society we'd be better with a defined benefit system for our retirements. Most people won't or can't discipline themselves to make a 401k work. We haven't yet seen the results when the 401k generation retires. It could be quite a mess with everyone living just on SocSec.

We should dump all government retirement programs, and move to social security for all -- with a benefit that would provide about $25,000 per year to everyone at age 67 regardless of life earnings. If you want more than that -- or you want it earlier -- you can also start a 401k.

Why are governments in trouble on pensions. 1) Too generous with future payments to some. Nobody should get public pensions of more than $40,000. Nobody. 2) Paying out any retirement money before age 67. Stop it now. Governments granted pension money in union negotiations because it was easy. Move it all to the paycheck and let the employee invest in a 401k. Public retirees at age 45 is absurd. [[And I know one -- so don't say they don't exist. The odds are the government will pay him for as many years in retirement as they worked.)

[Novine]

Public "retirees" at 45 sounds absurd until you start deciding what to do with all of the patrol officers and fire fighters who started at 21 and have put in 25 years of service. Sure, some move up the ranks into leadership positions. But not all of them. Do you want 50+ year olds driving patrol cars and engaging in foot races down dark alleys with suspects half their age? Or going up a ladder or into a burning structure to rescue you? Are you going to fire them or "ease them out"? Try that and you'll be slapped with an age discrimination lawsuit. It's the same reason that military people get to leave at 20 years. Paper pushers at a desk shouldn't be getting 25 and out retirements. But you're going to need some incentive to get police and fire people to leave or they'll stick around long after they should have moved onto a second career.

[DetroitPlanner]

One of the nice things regarding having a pension are the young folks usually don't stick around long enough to be vested. This money goes into the kitty to help those of us who have been on the job a while.

[Cincinnati_Kid]

Of course the money is here, its just growing at the top and us at the bottom aren't getting anything. Everything has been moving into third world countries. You have Ford making cars in Mexico and shipping them back here for sale. Not to mention all the factories that moved everything to China. The jobs that are available now are all retail and service jobs that have no benefits and $9 hour. Not sure how the 401k people expect someone to survive let alone save for retirement. Then you got health care that has become unaffordable so these people don't even have health insurance. This is all happening at the richest country in the world but then you have people making $10 hour voting Republican and protesting in the streets for tax cuts to billionaires so sometimes I wonder if maybe we deserve this.

+1 This country is screwed. It's ok for CEO's to rake in millions, nobody complains, but I remember people _itching about how much auto workers were making. The underlings do all the grunt work and make the company go, while the CEO's and upper management people get the glory. There's no spread the wealth in this country. "I got mine you better get yours"

[Wesley Mouch]

Public "retirees" at 45 sounds absurd until you start deciding what to do with all of the patrol officers and fire fighters who started at 21 and have put in 25 years of service. Sure, some move up the ranks into leadership positions. But not all of them. Do you want 50+ year olds driving patrol cars and engaging in foot races down dark alleys with suspects half their age? Or going up a ladder or into a burning structure to rescue you? Are you going to fire them or "ease them out"? Try that and you'll be slapped with an age discrimination lawsuit. It's the same reason that military people get to leave at 20 years. Paper pushers at a desk shouldn't be getting 25 and out retirements. But you're going to need some incentive to get police and fire people to leave or they'll stick around long after they should have moved onto a second career.

Some people at 65 can climb a ladder faster than a rookie. Discrimination solely on age is wrong. Any reasonable police or fire department can figure out how to work with people of various ages and capabilities. Putting anyone over 45 out to pasture at taxpayer expense has nothing to do with diminished capabilities.

[Novine]

"Any reasonable police or fire department can figure out how to work with people of various ages and capabilities."

Right, they create make-work positions wasting taxpayer dollars.

[Jimaz]

Attachment 20902
The One Percent

This 80-minute documentary focuses on the growing "wealth gap" in America, as seen through the eyes of filmmaker Jamie Johnson, a 27-year-old heir to the Johnson & Johnson pharmaceutical fortune. Johnson, who cut his film teeth at NYU and made the Emmy®-nominated 2003 HBO documentary Born Rich, here sets his sights on exploring the political, moral and emotional rationale that enables a tiny percentage of Americans - the one percent - to control nearly half the wealth of the entire United States. The film includes interviews with Nicole Buffett, Bill Gates Sr., Adnan Khashoggi, Milton Friedman, Robert Reich, Ralph Nader and other luminaries.

• So now Friedman says he was wrong

[Wesley Mouch]

"Any reasonable police or fire department can figure out how to work with people of various ages and capabilities."

Right, they create make-work positions wasting taxpayer dollars.

I have unlimited faith in the ability of government to continue being wasteful -- but I simultaneously believe that not all -- and probably not even more than a small percentage -- of governments are grossly inefficient AND resistant to reform.

But sure, they might create 'make-work' jobs -- so what's new. We just have to demand excellence and efficiency.

[Novine]

Is that your way of saying "I don't really have an answer to your question but this happy talk sounds good". What is the answer for the scores of patrol officers and firefighters who put in 25 - 30 years of service who are past their physical prime?

[Novine]

A little factoid about city pensions - the average city pension in 2011 was around $18,000 a year for the people in the General Retirement System. How much of a haircut do you think is fair for the average pensioner?

[cla1945]

DFD require their firefighters to retire at age 60. If they started their work career at 20, that's 40 years of service...they deserve a pension and whatever else they worked hard for and saved for.

[Wesley Mouch]

A little factoid about city pensions - the average city pension in 2011 was around $18,000 a year for the people in the General Retirement System. How much of a haircut do you think is fair for the average pensioner?

I don't think any haircut is 'fair' for someone at $18,000. But can we agree that any earnings above $18,000 can be reduced on a sliding scale starting at 10%, about 50% at $80,000 -- then 100% takeback after $100,000?

You don't need to give a haircut to everyone equally -- just fairly. Its fair to take more from those who are getting more.

[Wesley Mouch]

DFD require their firefighters to retire at age 60. If they started their work career at 20, that's 40 years of service...they deserve a pension and whatever else they worked hard for and saved for.

Agreed. They deserve their pension.

Do you think a resident who has paid Detroit taxes for their entire life also deserves police to protect them in the retirement?

Do you think a resident who invested unknowingly in Detroit bonds with money they worked hard to earn and save deserves to lose 100% of their investment, tossing them into poverty?

Do you think a Wall Street banker whose parents paid for his education, then gave him $5 million dollars tax-free when the passed away should see the value of his portfolio drop from $23 million to $22.9 million because he invested $100,000 in Detroit GO bonds?

Do I want a lifelong Detroiter whose entire savings is wrapped up in their house lose it because their property taxes will go up because pensioners must get 100% of what they 'deserve' -- plus free health care?

I do want pensioners to be treated fairly. But I've little sympathy for retirees under 67 and those that make more than $50,000 -- and for Wall Street bonuses too.

[Locke09]

Agreed. They deserve their pension.

Do you think a resident who has paid Detroit taxes for their entire life also deserves police to protect them in the retirement?

Do you think a resident who invested unknowingly in Detroit bonds with money they worked hard to earn and save deserves to lose 100% of their investment, tossing them into poverty?

Do you think a Wall Street banker whose parents paid for his education, then gave him $5 million dollars tax-free when the passed away should see the value of his portfolio drop from $23 million to $22.9 million because he invested $100,000 in Detroit GO bonds?

Do I want a lifelong Detroiter whose entire savings is wrapped up in their house lose it because their property taxes will go up because pensioners must get 100% of what they 'deserve' -- plus free health care?

I do want pensioners to be treated fairly. But I've little sympathy for retirees under 67 and those that make more than $50,000 -- and for Wall Street bonuses too.

What's fair is that if you vow a vow you keep it. If you made a commitment, unless you were scammed, and the other party keeps their part of the commitment, then you should keep your part. Anything else is automatically unfair, not right and dishonorable.

The residents had a role in the debt. They voted for the leaders and they voted yes on every bond submitted to them. They in effect created the debt that the City has. They deserve police protection not because they paid taxes, but because everyone deserves a certain quality of life, beginning with safety.

Bondholders, bond insurers and your millionaire Wall Street banker/investor received disclaimers at the point of investment describing the risks. Portfolios are available for any stock or bond you want to purchase, are they not? I have more than one investment account and every time I buy something, there are tools galore allowing me to investigate before purchase and warning of the risk. So, no vow has been made to them.

As I've said, lifelong Detroiters could never be persuaded to say no to a bond initiative, which is the cause of their high property taxes.

If a pensioner is 52 and earned a pension of $60,000, they don't need anyone's sympathy. They need to be given what they were promised. As I said, anything less is dishonorable. But maybe that's just the way I was raised.

[mwilbert]

If a pensioner is 52 and earned a pension of $60,000, they don't need anyone's sympathy. They need to be given what they were promised. As I said, anything less is dishonorable. But maybe that's just the way I was raised.

Bankruptcy is quite often about people not being given what they were promised, and how to distribute what there is to distribute. Certainly this bankruptcy is about that. The pensioners get sympathy, whether they need it or not, because the people who owe them money also owe a lot of other people money, and it doesn't look like there is enough to go around.

[Cincinnati_Kid]

A little factoid about city pensions - the average city pension in 2011 was around $18,000 a year for the people in the General Retirement System. How much of a haircut do you think is fair for the average pensioner?

It depends on how much their pension is I would think. I heard of some general pensioners getting upwards of $90,000 per year and some getting $600.00 per month, depending on when they retired and what type of job they retired from.

[Cincinnati_Kid]

Bankruptcy is quite often about people not being given what they were promised, and how to distribute what there is to distribute. Certainly this bankruptcy is about that. The pensioners get sympathy, whether they need it or not, because the people who owe them money also owe a lot of other people money, and it doesn't look like there is enough to go around.

Nail on the head.

[Wesley Mouch]

What's fair is that if you vow a vow you keep it. If you made a commitment, unless you were scammed, and the other party keeps their part of the commitment, then you should keep your part. Anything else is automatically unfair, not right and dishonorable.

The residents had a role in the debt. They voted for the leaders and they voted yes on every bond submitted to them. They in effect created the debt that the City has. They deserve police protection not because they paid taxes, but because everyone deserves a certain quality of life, beginning with safety.

Bondholders, bond insurers and your millionaire Wall Street banker/investor received disclaimers at the point of investment describing the risks. Portfolios are available for any stock or bond you want to purchase, are they not? I have more than one investment account and every time I buy something, there are tools galore allowing me to investigate before purchase and warning of the risk. So, no vow has been made to them.

As I've said, lifelong Detroiters could never be persuaded to say no to a bond initiative, which is the cause of their high property taxes.

If a pensioner is 52 and earned a pension of $60,000, they don't need anyone's sympathy. They need to be given what they were promised. As I said, anything less is dishonorable. But maybe that's just the way I was raised.

You were raised well.

But so where others who wrote the laws on bankruptcy. Most of them also were raised well and did their best to write fair rules.

The city fought the EFM. As a result, they got bankruptcy. So the law will make these decisions.

I think the law will look out for pensioners well. But I hope not 100%. There are others who will be harmed by the bad behavior of the city in the past -- and frankly by the pension trustees who let the city not contribute recently. Lots of righteous anger about what will happen in bankruptcy -- and no anger at all at the pension boards who went along for the rides -- literally -- and screwed their retirees.

[prokopowicz]

People like MikeyinBrooklyn who trumpet the benefits of the 401k programs are simply providing cover for the skimmers of the financial world. Most 401k plans are set up with high fee funds that benefit the advisors who promote them at the expense of the people who are expected to use them. Realize that you're in over your head when it comes to financial matters as many people are? The 401k plans will offer you "professional" guidance which means another layer of fees and the "professionals" directing your retirement funds into more high fee funds at the expense of your retirement funds. When people reach retirement without the necessary funds to provide a decent retirement, we blame them and not the system which is rigged to rob them blind at every step of the way. Have a great 401k plan with low fee funds and honest advisors? Consider yourself lucky.

Realize that pension fund investments are "skimmed" egregiously by financial professionals. These funds invest heavily in private equity and hedge funds. The typical hedge charges a "2/20" fee: the fund skims 2% of your principle every year, and 20% of any returns that they make. This makes the typical retail fund [[Fidelity, etc) look like a bargain.

Why do pensions funds invest in these hedge funds? Because the results from the investment professionals often are better than they can do themselves, and a lot less work.

There is basically no way to invest money without it being skimmed, short of personally buying assets like rental housing. Having a pension board invest the money for you does not avoid the skimming.

[Locke09]

The pension boards did indeed allow the City to defer payments, thinking that they were being team players and helping the City out. If they hadn't, they would have been criticized. But you are right Wesley Mouch, they should not have. The State also should not have allowed it since it violates the State Constitution.

I question whether bankruptcy laws are fair. I understand the original intent, but now it seems skewed towards allowing someone to dump their old commitments to turn around and make new debt and new profits [[in the case of corporate bankruptcy). For instance, Old GM stockholders were left with worthless stock. Now New GM is making profits again. But New GM doesn't have to take any of those new profits and repay any of its old debt. Every fiber of my being tells me that this isn't right.

If I had written bankruptcy law, a percentage of new profits you made over the course of a certain number of years would have to be put into a fund to eventually make whole some of your previous creditors. Something inside me sinks whenever I hear people applauding GM's new profitability because I keep thinking about the people I know who had Old GM stock [[I was not one of them.).

[Locke09]

Bankruptcy is quite often about people not being given what they were promised, and how to distribute what there is to distribute. Certainly this bankruptcy is about that. The pensioners get sympathy, whether they need it or not, because the people who owe them money also owe a lot of other people money, and it doesn't look like there is enough to go around.

If you are listening carefully and looking carefully at Orr's report, you will see that the bankruptcy filing is to allow the city to redirect money towards restructuring and rebuilding. That is very different from saying that there is not enough money to pay their commitments.

18 billion dollars in debt. Almost 6 billion is DWSD debt that the City can't claim it is having a problem paying. That leaves about 12 billion in general fund debt [[I'm rounding). Of that 12 billion, almost 6 billion is not even debt - it's retiree health care obligations over the next 30 years. The City doesn't need bankruptcy court to eliminate retiree healthcare.

Now, Orr claims to have a deal with a couple of creditors that saves $120 million per year. Orr's plan to cut retiree healthcare saves another $130 million per year. That's $250 million per year saved, or a full 25% of the budget and more than 50% of the $477 million the City currently pays to service debt and obligations. The report showed the City generally has about a $100 million deficit per year. This leaves the City with $150 million surplus to invest in restructuring without screwing the bondholders or the retirees.

So I am not buying the argument that there just isn't any way to pay the creditors. Just looking at the numbers that Orr himself provided and the City's budget.

[prokopowicz]

If I had written bankruptcy law, a percentage of new profits you made over the course of a certain number of years would have to be put into a fund to eventually make whole some of your previous creditors. Something inside me sinks whenever I hear people applauding GM's new profitability because I keep thinking about the people I know who had Old GM stock [[I was not one of them.).

Keep in mind that the stockholders are the owners of the company, whether or not they are tycoons. They are effectively the ones who are avoiding debts by declaring bankruptcy. If you force debts to be repaid, the existing shareholders would have to pay. Not only would the people you know lose their investment, they would be on the hook for paying off the bondholders. If you change the laws to force the new owners to pay off the old owners, and/or the old bondholders, you would not find anyone willing to be the new owner. There would be much better places to invest.