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Browsing Posts tagged Social Security

This week’s audio netcast:  Baltimore Mayor Stephanie Rawlings-Blake, the secretary of the Democratic National Committee, says the party needs to talk to voters about issues they care about. Professor Gary Donaldson recalls an era when the two titans of their parties – Lyndon Johnson and President Eisenhower – worked together for the good of the country. And Nancy Altman, one of the country’s top experts on Social Security, says the program can and should be expanded.

The Business section of the Sunday Post-Dispatch featured You may be your retirement fund’s worst enemy Did you know?Poor retiree

The typical working household close to retirement age had only $111,000 at the end of 2013 in their 401(k) savings plan at work and individual retirement accounts outside of work, according to Alicia Munnell, the center’s director. That $111,000 would provide only $500 a month for living expenses if converted to an annuity. Despite a stock market that’s soared the past five years, households have less stashed away for retirement now than they had in 2010. Then, the typical household had $120,000. Her report raises questions about whether the 401(k) system of preparing for retirement is failing Americans. In the early 1980s, most employers offered workers pensions known as defined-benefit plans. With those plans, employees who stayed on the job long enough to qualify for a pension didn’t have to think about saving or investing. Employers promised to invest and then provided guaranteed monthly payments to former employees throughout their retirement. Munnell says only about 17 percent of private employers still provide pensions.

What are the main problems with 401(k)’s

The mistakes of not saving, saving too little, borrowing from a 401(K) and paying expensive fees have a huge effect. Munnell calculates that a 60-year-old in 2013 who had saved since the age of 29 would end up with only $100,000 versus $373,000 if they hadn’t been sidetracked by the common mistakes. It breaks down like this: Fees reduce the balance to $314,000; withdrawals during job changes or loans cut it to $236,000; inconsistent contributions further reduce it to $165,000; and a failure to contribute at times can lower the balance to $100,000.

So if folks can’t save enough with a 401(k) what will they depend on in retirement?

With too little in savings, the typical household is going to be highly dependent on Social Security. But Munnell notes that Social Security is going to provide less to future retirees. The retirement age is moving from 65 to 67, so people who retire at 62 to 65 will see their monthly benefits cut more than now. In addition, people will need to pay more for Medicare. Medicare payments are taken out of Social Security before the government sends checks to retirees. In addition, higher taxes will reduce their Social Security because benefits are not indexed to account for inflation.

The average monthly Social Security benefit in 2013 was $1,294.

If we combine the Social Security benefit of $1,294 with the average $500 annuity that the average savings would provide the typical American will have a monthly retirement income of $1,794.  Will you be able to live on that?

If you can live on that or less vote Republican and support the party that has opposed Social Security and Medicare since their inception and are still aggressively trying to reduce your entitlements.  If you can’t live on that vote Democratic as they are the party fighting to maintain and expand  Social Security and Medicare.

To be sure, some Democrats have already signed onto the idea, including Senators Tom Harkin, Sherrod Brown, Mark Begich, and Elizabeth Warren

 

Yahoo has this piece from The Motley Fool on whether taking Social Security at 62 or later is the best way to go.  The advice is different than what you usually hear but the chart is very informative.  You will be the smartest one at the morning coffee club with this one.

In These Times has this account of how the conventional wisdom regarding the necessity of cuts to Social Security has been replaced with action to expand Social Security benefits - How Social Security Was Saved.

Lawson was also disturbed by the disconnect between the attitudes of policymakers and the will of the people. Polls from the last few years consistently show that a majority of Americans are opposed to Social Security cuts.

While groups such as Progressive Democrats of America (PDA) and Social Security Works, in addition to the AFL-CIO and AARP, had been raising the alarm about cuts since the Bowles-Simpson Commission in 2010, Lawson felt the threat demanded a larger, more active coalition. So he teamed with progressive organizers from CREDO Action and Netroots Nation to help translate public opposition into stronger Congressional opposition. They put out a call for an informal meeting about chained CPI. The goal was to get a broad swath of the national progressive movement to take a stand against cuts.
That may seem like a no-brainer. But fresh in Lawson’s and others’ minds was the healthcare-reform debacle. A coalition that had been united in support of the public option gradually buckled under pressure from the White House and Democratic leadership, eventually settling for a version of the Affordable Care Act that lacked a public option and that no one liked much.
“Progressive groups … all started off on the same page, but throughout the course of this fight, [power brokers] on the Democratic side would be able to pull people off on certain issues,” says Netroots Nation’s Raven Brooks of the healthcare compromise.“There are a lot of reasons why [a public option] didn’t win as a policy option, but … an important piece of it was this destruction of the unity that was there initially.”
During the 2012 fiscal-cliff showdown, Brooks and others were determined to stop history from repeating. So, in December 2012, about 35 representatives of progressive groups—the AFL-CIO, the Progressive Change Campaign Committee (PCCC), Democracy for America, MoveOn and Progressives United, among others— came together and held a thumbs-up and thumbs-down vote on whether to draw a line in the sand against any cuts to Social Security, Medicare and Medicaid. The result was unanimous: Chained CPI was an unacceptable pill to swallow, no matter the circumstances.

Salon has an interesting piece on President Obama’s approach to improving retirement security.  With few Americans having access to a defined benefit pension and the majority suffering from stagnant wages and unable to adequately fund their 401k, Social Security is becoming even more important.  Enjoy The quiet war on Social Security.  Meet the dark side of MyRA.

A year ago, the Social Security expansion movement was limited to dreamers, and had little to no clout on Capitol Hill. But thanks to some dogged determination, liberals began to recognize that the country stood at the precipice of a retirement crisis. Years of conversion from defined-benefit pensions to defined-contribution 401(k)-style plans made returns uncertain and subject to the vicissitudes of the stock market (as well as the greed of mutual fund managers, who subjected accounts to high fees, eroding the balances). Meanwhile, the savings rate plummeted amid stagnant wages (indeed, the savings rate is currently at historically low levels). What was once a three-legged retirement stool – pensions, savings and Social Security – had been whittled down to one. And the only viable way to avoid a disaster of baby boomer seniors falling into mass poverty is to expand the last leg of the stool, Social Security.

This notion of expansion gradually began to pick up adherents, from activist organizations like MoveOn.org and the Progressive Change Campaign Committee to think tanks like the New America Foundation. In November, Elizabeth Warren endorsed expanding Social Security in a speech on the Senate floor. The expansion movement had some momentum, and tangible legislation from liberal Tom Harkin and moderate Mark Begich to rally behind.

It is in this context that you must place the myRA policy. The Obama administration clearly heard the growing demand to do something about retirement. In a speech in Pittsburgh the day after the State of the Union address, President Obama said that “if you’ve worked hard all your life, you deserve a secure retirement,” adding that most workers don’t have a pension anymore, and while “a Social Security check is critical … oftentimes that monthly check, that’s not enough.”

But instead of going ahead and endorsing Social Security expansion, Obama introduced myRA, a glorified savings account deducted from your paycheck in amounts as little as $5. It’s portable from job to job, and it earns a small amount of interest, the same as the Thrift Savings Plan for government workers. The account can never go down in value, and it’s backed by the full faith and credit of the U.S. government. Plus, you can withdraw the funds whenever you want without a penalty.

This is a nice thing to have, but has little to do with retirement. Americans don’t need a new savings account vehicle; they need higher wages so they can actually manage to save a few dollars out of every paycheck.

From Huffington Post,

retirement income

Check out this video of workers using their fast hands to get the job done – WOW.

President Roosevelt signs the Social Security Act, providing, for the first time ever, guaranteed income for retirees and creating a system of unemployment benefits – 1935

That’s putting his hands to good use!

Did you know that the vast majority of Americans are counting on their IRA’s and 401k’s to finance their retirement?  Did you know that many IRA’s and 401k’s require you to assume 100% of the risk, 100% of the funding, and receive onlyponzi-scheme 30% of the gains?

PBS Frontline presents The Retirement Gamble Faces Us All, a look at the state of retirement in America.  Wait until you learn about the fees you may be paying on your retirement funds.  Scary.  Even scarier if Social Security is reduced or eliminated. 

The Department of Labor has issued new rules requiring funds to disclose their fees.  This short video explains in easily understood graphs the impact of these fees on your retirement.

Kiplinger Personal Finance – The High Cost of 401k Fees states that fees of 1% or less are reasonable.

Watch, plan accordingly, and join a movement to save Social Security and the legacy of American retirement.

USA Today recently published 5 Things You Need To Know About Social Security.  This piece took an interesting look at what Social Security actually means to many Americans. 

Social Security was never intended to be a pension you could live on. Instead, it was designed to be a supplement to retirees’ income. Currently, the average Social Security payout is $1,262 a month, according to the Social Security Administration (SSA). That’s an annual income of $15,144.

A remarkable number of people do live nearly entirely on Social Security, however: For about 23% of all married beneficiaries, Social Security represents 90% or more of their income. That soars to 46% of all single beneficiaries.

Nevertheless, that $1,262 a month would be tough for individuals to replace, especially because payouts are adjusted for inflation each year. How much?

Most planners recommend that you withdraw no more than 5% from your retirement savings in your first year, assuming you want to adjust withdrawals for inflation each year. Using that assumption, you’d need about $303,000 to generate an inflation-adjusted income of $1,262 a month for the rest of your life.

If you wanted a guarantee, you’d have to buy an immediate annuity with an inflation rider. An inflation-adjusted annuity yielding the same amount would have cost a 65-year-old $325,877 to $348,600 last year, according to Vanguard. That’s without benefits to survivors or disability benefits, which Social Security also provides.

An argument could be made that without Social Security taxes being deducted from your paycheck that money would have been socked away in savings accounts to be used in retirement.

My own experience makes this seem unlikely.  I don’t have anywhere near $300,000 to purchase an annuity equivalent to Social Security benefits.  If I can’t save that much with the 93.8% of my income left over after the 6.2% deduction for Social Security and Medicare the odds of me saving that amount are 0%. 

Would you save $300,000 with 6.2% of your income?

 

Warning: Messing with Social Security may result in electoralcution

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