Fair that Detroit bankrupcy will cut retiree pensions?

[Patranus]

If the government employees wanted their pensions, then maybe they shouldn't have run their city into the ground.

Couldn't have said it better myself.

 

[sactoking]

Well yeah. 401k is my money I put in.

Pensions are funded by employee contributions.

 

[Zorkorist]

Hard to see Detroit go down like this.

A whole city, fucked by Unions and Government.

-John

 

[Zorkorist]

The corporations, simply left.

-John

 

[fstime]

Pensions are funded by employee contributions.

Some sources put employee funding around 40%. Public pensions also rely on geting a hefty return through investments.

 

[Zebo]

I called this years ago people didnt believe me and here it comes. Pensions will not be paid from every state and city and federal gvt. Your 401ks will be worth nothing. SS will be worth nothing. Only thing worth anything will be possessions... land under your feet, assets you hold materially. etc.

What fair got to do with it no money. And more obama bails out closer we get to dollar bust and world says forget it.

 

[LTC8K6]

Detroit has been bankrupt for a long time. The can keeps getting kicked down the road.

Lots of other cities in the same situation. They just keep postponing the reckoning.

Even this bankruptcy will be such that the spending isn't bothered too much and the special interests get what they want.

When Detroit is bailed out, likely by the rest of us, the cycle will start again almost immediately, of spending more than they can possibly take in.

 

[michal1980]

The corporations, simply left.

-John

More like the people left.

1950s 1.8-2.0 million
now ~0.75 million

 

[JEDI]

i think detroit did ask the fed govt for a bail out, and obama laffed in their face

 

[Mursilis]

The management of the city did. The employees worked in good faith with an understanding that they would receive benefits. The bondholders however know that there is a risk involved with any investment. Now if you want to go after the politicians and seize their income and wealth and kick them to the street as paupers, be my guest. Those who went to work to do a job with what was a clear understanding of what to expect? I'm not for blaming them.

But many of these same workers elected the civic and union leaders who had to know the pension system was underfunded, so IMHO they do bear some partial responsibility. Democracy is serious business.

 

[Mursilis]

This is my biggest issue with the current system in California.
Many of the public employee pensions are run through CalPERS or CalSTRS which are state wide agencies. These agencies have had massive financial issue but because they are state agencies, the taxpayer is on the hook.

One example was CalPERS $1 billion land deal with Lennar (which has a Pelosi as President of Land Acquisition....but I digress) which it lost 80% on the investment.

The reality is that NOTHING in life is guaranteed. My 401k is not guaranteed and that is filled with money I "earned".

Its not not should be the fault of the taxpayer that the unions ran their pension system into the ground.

The difference between your 401K and a pension is that legally, you own that 401K, and you manage it (within the framework of the options your plan gives you). You can cash it out (with penalty) right now, if you choose, because it's YOURS. I know of no public pension you can cash out right now - maybe one exists? A pension is just some distant promise made by people who probably won't be around or in office when it's time for you to collect, and maybe managed by a politician's friend or family member who knows absolutely nothing about finance and investment. Good luck with that!

 

[Exterous]

I'm not arguing with that. If the bondholders invested their own money, they take their risks just like they'd take their rewards.

I think there is going to be some serious consideration about how the ruling on bondholders affects investers' choices in the future. Bonds are a huge way for a city to get money and has generally been viewed as very safe and tax free. If Detroit bond holders take a massive haircut I expect you will see a lot more skittishness from investors over municipal bonds - likely compounding finance issues for other struggling cities

Would anyone be supportive of a bankruptcy court seizing 401(k) accounts? For the average worker there would be no difference.

Except in how the programs are handled. As far as I am aware 401ks are required to be fully funded so the money is there as soon as it hits the account. You are also entitled to access the money when you want. The pensions are not fully funded here so the money does not actually exist to pay promised payouts and you have no access to the money until a certain age. I think having been offered company stock that you depend on having a certain value during retirement and then having the company go bankrupt would be a better analogy.

I would hope that there would be a way that current retirees won't be affected. Those that are still working will take an enormous hit but that's far different from pulling the rug out from under people who have been dependent on those funds.

Its highly unlikely they will avoid a large hit. At best I think they will lose their COLA increases as there is precedence for that in other municipalities. I think the 17% of promised values is either a headline grabber or marketing ploy (Well, it was only going to be 17% but we worked hard to get it to 50%. Be happy now!). I don't know the details but if I were a pensioner I would be preparing for a drop of 25-50% in payouts and if I was still currently employed by the city I would kiss most of my pension goodbye

 

[sm625]

Bondholders should be higher up on the chain than retirees. If bondholders continue to get shafted then the loss of confidence in bonds will result in many many more bankruptcies.

 

[nehalem256]

The difference between your 401K and a pension is that legally, you own that 401K, and you manage it (within the framework of the options your plan gives you). You can cash it out (with penalty) right now, if you choose, because it's YOURS. I know of no public pension you can cash out right now - maybe one exists? A pension is just some distant promise made by people who probably won't be around or in office when it's time for you to collect, and maybe managed by a politician's friend or family member who knows absolutely nothing about finance and investment. Good luck with that!

Well the other difference is that you are "guaranteed" a certain return. Unfortunately in this case the unions negotiated for a "guaranteed" return that was unpayable and the city can't raise taxes to cover it.

Given that government workers unions tend to be big contributors to campaigns it is hard to feel sorry for them when they were essentially sitting on both sides of the negotiating table.

 

[spacejamz]

IIRC, the total amount of unfunded government pension liabilities (might be at the state level though, not city) is around 1 Trillion dollars...When this shit hits the fan, it won't be pretty...

 

[Spungo]

Pensions are funded by employee contributions.

The math involved is incredibly sketchy. I looked at my dad's pension compared to what he put in and it worked out to something like 15% growth every year. That's completely unrealistic. A person with a 401k would never in a million years expect that kind of consistent growth for 30 consecutive years. The math just doesn't work. The people running these pensions knew it was a scam from day 1 and that it would eventually collapse. The people who made the pension rules were probably 5 years from retirement. They knew that they would get all of the money the pension says they should get, but people retiring 20 or 30 years later would get shafted.

 

[s0me0nesmind1]

The reality is that NOTHING in life is guaranteed. My 401k is not guaranteed and that is filled with money I "earned".

Its not not should be the fault of the taxpayer that the unions ran their pension system into the ground.

ding ding ding - we have a winner. Someone that gets it. There is usually at least 1 in every thread - rarely progressive though 😉

The only thing guaranteed is death and taxes. If you want to be safe, invest in assets - I don't think those will disapear other than depreciated value 😛

 

[s0me0nesmind1]

The math involved is incredibly sketchy. I looked at my dad's pension compared to what he put in and it worked out to something like 15% growth every year. That's completely unrealistic. A person with a 401k would never in a million years expect that kind of consistent growth for 30 consecutive years. The math just doesn't work. The people running these pensions knew it was a scam from day 1 and that it would eventually collapse. The people who made the pension rules were probably 5 years from retirement. They knew that they would get all of the money the pension says they should get, but people retiring 20 or 30 years later would get shafted.

Considering your usual IQ level it makes sense for you to not understand stacking interest 😕

 

[zephyrprime]

It can't be helped. There is just not enough money to go around. Detroit has lost 28% of it's population since just 2000. There are simply not enough people to go around to pay for those pensions.

The entire idea of unfunded pensions which are paid for by future generations is unsafe and should be illegal. Fully funded pensions is the only way to go. However, switching over is so expensive that it's basically impossible to switch over everything to that system.

 

[zephyrprime]

Pensions are funded by employee contributions.

Not fully. Some of the pension pay outs come from general tax revenue. Pensions are not fully funded like 401k's.

 

[s0me0nesmind1]

It can't be helped. There is just not enough money to go around. Detroit has lost 28% of it's population since just 2000. There are simply not enough people to go around to pay for those pensions.

The entire idea of unfunded pensions which are paid for by future generations is unsafe and should be illegal. Fully funded pensions is the only way to go. However, switching over is so expensive that it's basically impossible to switch over everything to that system.

It can't be helped because the problems with our government(s). A government in capitalism must be run like a business in capitalism. When things to go to shit in that city, it's time to start cutting costs. When things start to go downhill in a company, you need to start cutting costs of your current falters and increase innovation for the next. Our government doesn't know how to cut costs. They just know how to sign ludicrous contracts under the table and sit there twiddling their thumbs assuming more tax will keep coming in.

 

[sportage]

I'd have to see the fine print. Especially the details with the financials.
And their definition of "broke".
Certain political parties in power have a tendency with purposely screwing things up, to get their way or make some political point.
I assume this was the case here.
The whole thing stinks to high heaven.
And considering Emergency Manager Kevyn Orr is pocketing a cool mill for his efforts.
And considering who it was that appointed him to the job in the first place.
Beginning to smell the stench?

 

[nehalem256]

It can't be helped. There is just not enough money to go around. Detroit has lost 28% of it's population since just 2000. There are simply not enough people to go around to pay for those pensions.

The entire idea of unfunded pensions which are paid for by future generations is unsafe and should be illegal. Fully funded pensions is the only way to go. However, switching over is so expensive that it's basically impossible to switch over everything to that system.

401Kish accounts are the only way to go. The only reason that pensions seem better is that the risk appears to be transferred to the government/corporation.

As Detroit is now illustrating that transfer is really an illusion.

 

[actuarial]

I think there is going to be some serious consideration about how the ruling on bondholders affects investers' choices in the future. Bonds are a huge way for a city to get money and has generally been viewed as very safe and tax free. If Detroit bond holders take a massive haircut I expect you will see a lot more skittishness from investors over municipal bonds - likely compounding finance issues for other struggling cities.

This is a good thing, long term. If Detroit bondholders get bailed out, you will see more cities failing, not less.

 

[Spungo]

Considering your usual IQ level it makes sense for you to not understand stacking interest 😕

This is exactly how union guys pass unsustainable pension plans. They start mumbling something like "well it has compounding interest so the ROI is COP in the bond market today which will grow until China's LJZ reaches parity with the THO"
Rather than asking to see the numbers, people vote yes and move on.