While many working-class Americans have now since retired on public-sector pensions rather comfortably, the reality is that many cities and municipalities are finally realizing they wrote checks they couldn’t cash and the bill is due. Similar to the notion of Social Security, which was enacted when the average American life expectancy was only a few years more than the retirement date and there were many more workers per recipient in the system, public pensions like those paid to city workers, police, firefighters, teachers and the like are similarly problematic. Pension plans have been perennially padded to curry favor with voters while being mismanaged to the point that under current obligations, many cities and municipalities will NEVER be able to fulfill their promises. Instead, either workers will not get their due, or as usual, taxpayers (you and I) will foot the bill.
Here is a real-life example of what happened in Detroit to the tune of $2BILLION or more in misappropriated funds (above and beyond pension payouts due) in which someone’s gotta pay. If you think this same story has not and will not repeat itself all over the country, you’re naive. Here are a few zingers from the article showing how this happens (bolded text is my emphasis):
- “The payments, which were not publicly disclosed, included bonuses to retirees, supplements to workers not yet retired and cash to the families of workers who died before becoming eligible to collect a pension, according to reports by an outside actuary and other people with knowledge of the matter.
- Most of the trustees on Detroit’s two pension boards represent organized labor, and for years they could outvote anyone who challenged the payments.
- ”People were having a hard time, living hand-to-mouth, and we thought we would give them some extra,” Ms. Bassett said.
- The excess payments were often made near the end of the year, when recipients needed money for the holiday
- …long history of paying out more than the plan’s legitimate benefits, including the bonuses, known as ”13th checks,” which were reported this month by The Detroit Free Press
It’s just totally outrageous. These are public statements made by people involved. I mean, it’s so easy to toss around OTHER PEOPLE’S MONEY. That’s the problem with public assistance funding. It’s a bunch of bureacrats who really don’t care about the funds, what the actual obligations are, or the future impact. Seriously – giving away extra public pension funds for Christmas? Imagine what your employer would say if you issued funds to your supplier or rebates to customers unilaterally just to “be nice”? You’d be fired and probably sued.
Curious what your own retirement looks like and how it may look with reduced pension payouts if you’re in a similar boat? Check out Personal Capital’s Free Analysis – a portfolio/retirement analysis tool reviewed in full.
Speaking of pensions (a pet peeve of mine when they’re not funded and run by cronies), check out what the pensions look like in Greece (wonder why they’re broke?), 5 Reasons you should NEVER sell your pension (unless maybe Detroit owes you money), how to find out what your pension’s really worth, and how young teachers were laid off to fund lavish pensions.
What Are Your Thoughts On This Latest Pension Outrage?
{ 2 comments… read them below or add one }
I think that’s terrible and I also think you shouldn’t be accusing bureaucrats of not caring about fiscal responsibility or taxpayers. That’s offensive to those of us who work so hard every day protecting taxpayer interests. Some parents will do horrible things but that doesn’t mean that all, most, or even a significant number of parents are bad, does it?
Maybe I’m being too hard on you, actually. Detroit is a mess. People are idiots. I just want readers to realize that most people who work for a pension provider would never do something so reckless. The structural issues are still there, just like they are with Social Security.