This is a great example of why everyone should be concerned about building their own retirement income, and really making sure that you are fully covered without counting on any government retirement plans, like city pensions, or even Social Security for that matter.
Let’s look at it this way; in 1950 Detroit was known as “Motor City” and had one of the highest per capita incomes in the country! About 60 years later (officially as of 7/18/2013) it filed for bankruptcy, with debt of approximately $19 billion! Today, this city has one of the highest crime rates, more than 18% unemployment rate, and ongoing problems with public utilities, including a large number of broken street lights.
Of course, all the investors, bond holders and vendors are all worried – but the biggest concern comes from the City workers who are obviously depending on their pension funds to be able to survive during retirement! Apparently, the City has consistently failed to give enough money to its pension plans. And now, with $2 billion in claims, the city workers’ retirement structure is actually the biggest unsecured creditor of Detroit, followed by the second largest unsecured creditor: the police officers’ and fire fighters’ pensions!
Can you just imagine what must be going through the minds of all those workers right now!? I’m sure many of them worked in the City system because they thought it was secure, and now, a rug is being pulled right from under their feet! It’s truly scary! Don Taylor, who is the head of the Retired Police and Fire Fighters Association, said that he hopes that “at the very least that current retirees’ pensions remain secure and in force.” So all these people’s retirements are now at the mercy of whatever the courts decide, all their dreams are hinged on their local government and the legal system!
Unfortunately, this is just the beginning. What about the rest of the country? The economy is improving, but it’s a lot easier for it to fall apart than to be rebuilt, and we’re not out of the woods just yet. There are still many cities, states and companies that continue to deal with the aftershocks of 2008. Here, in our own state of sunny California, we’ve got issues of our own! The state has been trying to balance the budget, but guess what: the CalPERS and CalSTRS pension systems are underfunded right now!
Now, I don’t like being all about doom and gloom – I think the media already gives us enough of all that negativity. Instead, I like to think about solutions! This is why, ladies, income planning is extremely important when it comes to being independent in retirement. Let’s face it, we live longer and we definitely like to be secure, so don’t depend on anyone but yourself when it comes to your retirement income. Not on the government and not on your pension at work. You can only depend on yourself. This means estimating your future income needs and starting to save today, to have a more secure tomorrow. So that no matter what happens in our economy, or whatever decisions are made by our elected officials, you won’t have to be at anyone’s mercy.