Bankruptcy Hits Home for Detroit retirees
If the city of Detroit does indeed go into bankruptcy, there are few individuals who will be affected as much as current and past employees.
No one knows for sure just how much pensions may be cut, or how health care coverage will be changed. But one thing is for sure: bankruptcy will hit home.
Regina Vance loves Detroit’s parks. When she retired as district supervisor for the city’s Parks and Recreation Department, she planned to spend much of her leisure time outdoors, “Just enjoying life and not having to worry about too many things.”
But now, like so many Detroit workers and retirees, she does worry that bankruptcy has hit home.
She told us, “It’s fairly stressful. Economically I never thought I would be at this level, worrying about each pay, how my money’s going to flow, how to take care of bills and what have you.”
A new state tax on pensions and the end of a bonus retirees called “the 13th check” has forced Vance to give up some of her free-time for a part time retail job where, “They only give you the hours when they can afford to give you hours.”
While Vance is worried, many of her fellow retirees are angry. They feel they have been betrayed by the city after living up to their part of the pension deal.
Retired police and firefighters are especially dependent on pensions, since they are not part of the social security system.
Don Taylor, head of the Retired Detroit Police and Firefighters Association explained, “The pension is all we get and my pension is basically $30,000 a year.”
Financial planner Rick Bloom says Taylor and others need to be prepared to take a budgetary hit. “They’re going to get less in their pension. It may not be fair, but I think that’s the reality of what’s going to happen and I think because of that, they have to start looking at their finances today to get their house in order.”
Regina Vance recently sold her home on Detroit‘s west side and moved to an apartment near downtown. She said, “I had to sell my house, I couldn’t keep up.”
But for those with a lot of equity in their homes, Bloom says there are other options, “I think for some people they need to look at things like reverse mortgages. A reverse mortgage would allow them to withdraw the equity in their home and use that to help cover living expenses.”
And with bankruptcy on the horizon, Bloom says now is the time to act, “Things like your automobile insurance, shop it around, get a comparative rate. People are going to have to learn to save some money and I think one way of doing that is at least to know where your money is going.”
Vance says she has faith in God and she’s trying to have faith in the bankruptcy system, “Otherwise we’re going to be pretty much devastated with a great deal of loss.”
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