Friday, February 21, 2014

Detroit current retirees stiffed; first time ever in a municipal bankruptcy?

CNN reports that the reduction of pensions to current retirees from Detroit's workpalce is the first ever for a municipal bankruptcy.  I thought this had happened before in California (like Stockton, covered by Morgan Spurlock). 

The Michigan state constitution is supposed to have protected the pensions promised under worker contract, but judge Rhode had ruled that federal law would trump a state constitution.

The story, on CNN Money, by Melanie Hicken, is here.
  
Health insurance for retirees who are not yet old enough for Medicare will apparently be eliminated, and these individuals will have to deal with Obamacare.  Here's an older story about Michigan's exchanges, link.

Sunday, February 09, 2014

Abstractness of debt-ceiling debate hides real problem: aging population, demanding more services (Post op-ed)

The Washington Post Sunday offered an op-ed by Robert Samuelson, "The End of Government", here, pointing primarily to the expansion of costs in caring for seniors, who are politically powerful and usually vote, leading to cuts in so many areas, even the speed of the court system.  And the "aging population" (or "demographic winter") problem is not as severe in the United States as many other countries (especially Japan); in some countries, like Russia, the upside down population is driving social tensions like anti-gay attitudes, on the idea that gay people cause a drop in population replacement and fertility (at least Putin claims that).

Samuelson also notes that another debt ceiling fight may be coming, and that the polemics of the issue obscure the real problem of how we handle longer lifespans and fewer workers and babies (born by people who could actually afford to raise them).  

Saturday, February 08, 2014

Employers new practice of paying 401(k) matches once a year undercuts the discipline of employee savings

Some employers have been undermining associates retirement savings by paying 401(k) matches only at the end of the fiscal year, denying employees the effect of compounding or dollar cost averaging during the year, and causing employees who leave any time during the year to forfeit the entire match.

A similar thing can happen with severance pay: if an employee is laid off before making the date of another full year, some weeks of severance can be lost.  This did happen to me in 2001.
  
The latest furor came about when AOL made this change, along with a remark that two employees whose young kids had big illnesses hit the bottom line, when there are also controversies over CEO pay.  The link is  (website url) here

This behavior by employers undercuts advice that people should save regularly their entire working lives.  

Monday, February 03, 2014

Obama implements a small retirement plan for lower income people

On Saturday, the Washington Post spoke favorably about President Obama’s proposal for new “starter” retirement accounts for people, either contractors or lower-wage hourly workers who don’t get them in the workplace.  The president appears to have the authority to order Treasury to set up these MyRA’s without Congress.  The link for the story is editorial is here. California has its own plan called Secure Choice.
     
It seems, though, that with lower-income people the public strategy has been to get them to consumer more and go into debt and simply become more vulnerable, and potentially dependent.