Pension crisis endangers (not just) Chicago's future

Following the bankruptcy in Detroit we now have Chicago hitting the radar with their spectacularly under funded pension plans. This is not just a US problem as it can also be see in the southern half of EU countries and probably the northern half as well.

For anyone retired or hoping for retirement (state or privately funded) you may wish to take note of this increasingly common disaster in making and hopefully take some type of action to protect yourself.

Pension crisis endangers Chicago's future

More teachers losing their jobs, thousands fewer police and firefighters on duty, less frequent trash collection and miles of potholed roads going unrepaired - all as property taxes soar. Heads up folks.

But that's the scenario Emanuel and others have said could befall the nation's third-largest city if the state Legislature - which passed a landmark measure last week to address Illinois' severe public pension shortfall - doesn't deal with Chicago's own multibillion-dollar pension problem.

There's really only a few ways this can be dealt with, more taxes, cutting services and cutting the pensions themselves.

Chicago's pension funds for city workers, police officers and firefighters are about $19.5 billion short of what's needed to meet its current obligations. Add in the unfunded liability for Chicago teacher pensions, and the total shortfall jumps to about $27 billion.

Emanuel wants the Legislature, which must approve any changes to pension benefits, to raise the retirement age and cut cost-of-living increases, as it did for the state pension system. If the city doesn't cut services and pension benefits aren't changed, he says, the annual payment would require a 150 percent hike in property taxes - an increase he calls "unacceptable."

While not all cities have under funded pension plans many do. When push comes to shove (as in Detroit) it's not going to be the secured bond holders that lose, first up on that list is unsecured pension funds. Heads up folks.

American Cities And Counties' Unfunded Pension Liability Totals $574 Billion
Coming Pension Meltdown: The 10 Most Troubled City Systems
Pensions in Crisis: Europe and Central Asia Regional Policy Note

reply to post by Bassago


Blame the Wall Street Hedge Fund Managers and their crony city government officials!

Here is and interesting article that describes how Wall Street is robbing this countries pension funds.

The interesting snippets I would like to post have some inappropriate language, so for those wanting to read the article here is the link.

Looting the Pension Funds

Of course the MSM doesn't want to touch this one, because it would bite the bankers hands that feeds them!

Looks like another Banker Bailout! ie THEFT!

Bassago
This is not just a US problem as it can also be see in the southern half of EU countries and probably the northern half as well.

Southen half yes, Central yes. North? Nope they are sitting pretty budget wise, dunno how they do it but they have low debt and good public services, though high taxes may be a factor haha

Its not so much the welfare its the missmangement and bad spending that seems to be the problem.
Of cause there is always the risk in the future of the Northen Europe countrys voteing in a inedpt goverment like the UK did in 1997 and running there country into the ground with extreme money missmangement.

reply to post by crazyewok

Southen half yes, Central yes. North? Nope

Poland just confiscated half of their pension funds. True it was to cut their soveriegn debt load but what's the difference?

Poland Confiscates Half Of Private Pension Funds

reply to post by seeker1963


Exactly.
Pension funds = unsecured (you're hosed.)
City Bonds = secured (or mostly so, keeps Wall St and bankers safe.)

Bassago


Poland just confiscated half of their pension funds. True it was to cut their soveriegn debt load but what's the difference?

Poland Confiscates Half Of Private Pension Funds

O right.

Bit of confusion on what we class as northen Europe. My mistake. We sort of call the Ex soviet states as eastern europe normaly. I guess you could argue the debt was not so much caused by pensions but the debt caused by investment they had to make to get out the economic rut the collapse of the soviet union left them in, but yeah , how ever you say it they have debt problems.

No when I mean Northen Europe I mean the scandinavia countrys.

The city I work for in Florida tried to hard freeze our pensions last year. At the time I didn't know what a hard freeze was. I do now.

I just find it funny that the majority of the people I work with, including supervisors, tell me everything is going to be alright. Really, everything is going to be fine? Then why did the city try to hard freeze? That is clearly a sign that they don't have the funds to fund current pensioners not to mention future liabilities (me).

Maybe they said everything is going to be fine because they know that the pensions will be bailed out by taking other peoples money.

Well I can say this for certain. I will not take other citizens hard earned money to bail out my own pension. Absolutely not.

I just don't understand why they won't give me the option to opt out of their retirement plan. Let me invest my money the way I want to.

reply to post by seeker1963


So essentially Wall Street is robbing the people blind. Guess I won't be investing anything in the states if that's the treatment I'm going to be receiving.

reply to post by TorqueyThePig


Only thing I can think of to do is limit the amount you contribute and take that savings to purchase hard assets. By that do what India, China, Russia and most of the eastern countries are doing, buy physical gold.

Oh yes and if the US government tries to confiscate it (again)... well, you'll have to decide what to do then.

reply to post by Bassago


They made promises to public employees for decades that they never had any plan to honor. Mayors and County presidents kept municipal workers as reliable allies and foot soldiers for their politics machines by telling them they would retire in relative comfort. Problem is, they never figured out a way to finance the promises and the unions didn't care because they thought the law would protect them and the taxpayers would be on the hook regardless of how things went.

Why would they even care though? The obligations they were putting the taxpayers on the hook for wouldn’t materialize until decades after they left office.

As far as I am concerned you make a deal with the devil and do his bidding, don’t be surprised when you find out he’s a no faith partner.

reply to post by crazyewok


Estonia should also be considered Northern Europe, despite it being in Baltics. The culture and language are Nordic, very similar to Finland. So is the economic direction chosen, leaving out the immigration policies. Latvia and Lithuania are more slavic by culture.

The country is younger though due to being occupied by USSR. Currently the people on pension are losing the most. They worked during the Soviet era and all the funds were lost. Currently they are being given under the minimum salary and under the minimum living wage monthly of national pension. For highest employees back then with significant background of course it is higher. Although the government is not able to pay everybody fair pension, so the size is small. The costs here are somewhat similar (slightly cheaper) compared to cheaper US states, yet the pension is around 4500 dollars a year. The current system will possibly work better for the future. Everybody pays in certain 2% on to which government adds 4%. It is obligatory to pay it when working. Also one has to choose a pension fund, where they want to grow their money- whether risk more to be able to get more or risk less and be in conservative fund. There are government one´s and private ones, which are run by different Nordic Banks usually. If you don´t choose any, you are automatically put to government conservative one.

In Finland the pensions are very high, average is around 27,000 dollars a year. The pension is dependent on both - the average salary of the person during lifetime (out of which they paid certain % for pension (obligatory)) and national pension added to it. There is a requirement for every pension fund ) that everybody is required to produce at least certain increase (social ministry decides every year) in every year, otherwise there will be certain consequences. Employers choose the pension funds who they work with and pay for their employees. The amount paid depends on the productivity of the fund. If the fund did not meet previous standard, next year, the employee must pay more on top of every employee´s salary (without lowering their salaries). I did not find numbers about recent years, in 2003. average employer paid 21.4% of every salary to pension funds out of which 4.6% came directly from employees salary and the 16.8% was paid on top of the salary by the employer. The goal was 4.5% that year, so if the fund the employer had chosen did not produce that much, next year the employer has to pay more per employee´s salaries. This is the basic how it works, I have never researched much on it, to be honest.

It is hard to predict how this will work in the future. It is true that the nations are becoming older and the birth rates are going down. Although it is very likely the productivity rises a lot in the coming years. There will be less jobs due to automation, but the productivity will be also higher. Considering the directions these countries have chosen, especially education-wise, I believe they have advantage compared to many other countries. Knowledge-based economy is a wise bet for the future. Technology and advances can change the future a lot and I doubt significant trouble will happen, some solution will be found to the issues.

Although that is the future. The countries/cities/states who have to go through such thing now can cause significant trouble to the people, who worked all their lives to get the pension. At the end, public employee are not usually paid extremely well and one of the motivations in getting that jobs lies in the pension. That also brings more talent to the field, otherwise it would be impossible to compete with private corporations, who can severaly outpay the public institutions. Currently the system will not change, at least in the coming years and the only one´s losing from the bad decisions are the people who have worked all their lives and can not retire at old age.

TorqueyThePig

I just don't understand why they won't give me the option to opt out of their retirement plan. Let me invest my money the way I want to.

Don't think private investments can't and won't be wiped out too.

It's all about the transfer of wealth and power to the super elite. Private plans can be wiped out through things like bank and stock market crashes. This is just a way to take another segment of the middle class wealth.

reply to post by Daughter2


Oh I totally agree with you. If the money I paid in to retirement was in my pocket I would pay off debt, buy land, invest more in my education, and precious metals.

I just watched the film Elysium, it's an intesting kind of sci-fi picture,
the director thinks it's a reflection of today....have a look if your into
what may happen in a two class system, it's an extreme example though.