Posts Tagged ‘Social Security’

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In the current budget debate, the loudest calls for Social Security cuts are coming from two lobby groups—Fix the Debt and the Business Roundtable—that led by CEOs who will never have to worry about their own retirement security.

According to the Institute for Policy Studies [pdf], the retirement assets of Business Roundtable CEOs average $14.5 million—more than 1,200 times as much as the $12,000 median retirement savings of U.S. workers near retirement age. A retirement fund of $14.5 million, combined with Social Security, would generate a monthly retirement check for these CEOs of $88,576. That’s 68 times what a typical U.S. retiree can expect to receive.

Many of these same CEOs are calling for spending reductions on so-called entitlements (via, e.g., a shift to “chained CPI” and raising the Social Security retirement age), while at the same time accumulating enormous retirement funds for themselves and leading companies that have slashed retirement benefits for their own employees.

Right now,

American workers face a “retirement income deficit” (i.e., the difference between the amount of money needed to maintain one’s lifestyle in retirement and the amount of money saved in retirement accounts) of $6.6 trillion, according to the Center for Retirement Research at Boston College. Six million American workers lived in poverty in 2010. This number is expected to grow by a third – to 8 million – by 2020. Without Social Security, 43.6 percent of all retired Americans would be living in poverty, according to the Center on Budget and Policy Priorities.

Among Americans approaching retirement (age 50-64), the bottom 75 percent by wealth had just $26,395 in retirement assets, on average. This is enough to generate a $156 monthly check to supplement their Social Security. The wealthiest 25 percent of this age cohort is slightly better off with $52,000 in retirement savings, enough for an expected $308 monthly check in their golden years.

As I say, only in America. . .

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Bernie Sanders and Elizabeth Warren are pushing back against the idea that we need to impose cuts in Society Security benefits—instead calling for an expansion of the program.

As Ezra Klein explains,

For years, pension experts have spoken of the “three-legged stool” of retirement savings: Social Security, employer pensions and private savings. In recent years, however, that stool has begun to wobble, and today, Social Security is basically the only leg holding it up.

In 1980, about 40 percent of private-sector workers had a guaranteed pension. By 2006, that had fallen to 15 percent. Today, the 401(k) reigns supreme, with a trajectory that is almost the precise reverse of guaranteed pensions: In 1979, 17 percent of workers had a 401(k). Today, 42 percent do.

Those 401(k)s, however, are woefully underfunded. In 2010, 75 percent of workers nearing retirement had less than $30,000 in their 401(k). Sixty percent of low-income households are at risk of being unable to maintain their already modest living standards in retirement.

Individual savings don’t look much better. About a third of households don’t have a savings account at all. More than 40 percent don’t have enough to cover basic expenses if they lost their main source of income. In a vicious cycle, the need for savings is so great that many workers are tapping into their 401(k)s early: In 2010, contributions to defined-contribution pensions totaled $176 billion, while early withdrawals — which carry heavy penalties — totaled $60 billion.

Today, Social Security provides 37 percent of the income for all Americans over 65, and about 80 percent of the income for seniors in the bottom half of the income distribution. Given the state of private and employer pensions, those numbers will have to rise in the coming years, or else the standard of living for seniors will fall.

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Those of a certain age will remember “hearts and minds”—both LBJ’s words (“the ultimate victory will depend on the hearts and minds of the people who actually live out there”) and the powerful film by Peter Davis.

Today, it is the Right that is conducting a battle for the hearts and minds of young Americans.

There is, of course, the Opt Out campaign waged by the Koch brothers-backed group Generation Opportunity, urging Millennials not to sign up for insurance on the health care exchanges created by the Affordable Care Act.

And then there’s Stan Druckenmiller, the billionaire fund manager, who is traveling around the country visiting college campuses.* His goal is to scare young people into believing that (a) there’s a debt explosion coming, which will ruin the country, and (b) the primary causes of the growing debt are entitlement programs, which means that seniors are stealing from the young. This is the Tea Party-inspired generational theft meme I’ve written about before.

According to the generational theft campaign, the dramatic lowering of the poverty rate among the nation’s senior citizens (via Social Security and Medicare) represents not progress but, instead, the cause of an approaching apocalypse, as Baby Boomers begin to retire and more claims on made on those programs. There’s no discussion, of course, of why the federal debt is a problem (just some large scary numbers), and alternative means of containing the debt, such as raising tax revenues from large corporations and wealthy individual) are derided (because, in his view, rich people would simply stop working).

During his most recent presentation, Druckenmiller made much the same argument to scare his young audience, and then invoked the memory of the anti-Vietnam War movement:

“My generation, we brought down the president in the 60’s because we didn’t want to go into the war against Vietnam,” he said. “People say young people don’t vote, young people don’t care. I’m hoping after tonight, you will care. There is a clear danger to you and your children.”

Put aside for the moment the obscenity of comparing the carpet-bombing of the Vietnam War to the strains associated with the federal debt. The fact is, the federal debt is not out of control (not now and not for the foreseeable future). And the existing programs for the elderly—those who are currently retired and those who will be leaving work in the coming decades—should be expanded, not cut back. It can be done if we begin to seriously discuss and address the instabilities and inequalities created by current economic arrangements.

As it turns out, the next evening, the inaugural Chuck Craypo memorial lecture featured a panel discussion with Nelson Lichtenstein and Dan Schlademan on Wal-Mart. They demonstrated to the young people in attendance what they should really fear is living a world that is being remade in the image of retailing giants like Wal-Mart. It’s that prospect, and not the supposed conflict between generations, that should really capture their (and our) hearts and minds.

*Disclaimer: I don’t remember him but Druckenmiller apparently graduated from Bowdoin College the year before me. Here’s a link to Julia La Roche’s description of Druckenmiller’s presentation at his alma mater a few months ago.

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Do you know why Social Security is so important? Because most Americans don’t have enough savings to retire on.

The average American (members of households whose income was in the middle fifth percentile of incomes) had, on average, only $34,981 in individual retirement savings in 2010. That’s because most American workers no longer have defined-benefit pension plans and don’t earn enough to adequately save for retirement. So, they are forced to have the freedom to rely on Social Security.

It’s the major way we, as a society, support (or at least keep out of poverty) our fellow citizens who have worked a large part of their lives and are now able to retire.