Can retirement money just vanish?
Dec 4, 2013, 7:32 AM | Updated: 1:23 pm
As they've learned in Detroit, despite this idea that a pension is a guarantee, it turns out to be like any other promise. It's only as good as the organization that backs it. (AP Photo/Paul Sancya, File)
(AP Photo/Paul Sancya, File)
It was the latest humiliation for the city of Detroit.
“A shocker in the courtroom! The Michigan constitution does not protect pensions,” exclaimed WWJ’s Charlie Langton after a judge ruled that the City of Detroit, $18 billion in debt, can go into bankruptcy.
Which means the pensions and health plans of former city employees could be cut to pay Detroit’s bills.
That’s bad news for former workers like David Sole, “We think taking a dime or a dollar is too much. The banks are considered secure creditors – were garbage.”
And it’s bad news for David Allen, a firefighter who was injured when a building collapsed on him, “I feel betrayed. I feel short-changed, I feel angry.”
Angry – because he and other Detroit retirees could see their pension checks cut by 84 percent from what they expected to get.
It’s down to a choice between paying the people who used to work for the city, or paying the people the city needs now.
How bad is it? “The short-handed police take 58 minutes on average to respond to a call for help here, and 40 percent of the street lights are out,” reports CBS Correspondent Dean Reynolds.
And the message to Detroit’s 20,000 retirees – and to present and future retirees anywhere – is pretty simple: despite this idea that a pension is a guarantee, it turns out to be like any other promise. It’s only as good as the organization that backs it.
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