Wall Street will never beat Social Security’s guarantee

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[Pension Rights Center] During a week of volatility in the stock market, retirees are happily celebrating the 84th birthday of the Social Security System—a universal social insurance program that guarantees their benefits no matter what direction their 401(k) or personal investments are heading. Since 1935, Social Security has been the cornerstone of the retirement income system in this country, providing secure benefits that never quit, keeping millions of people out of poverty and helping them to maintain a basic standard of living once wages are gone.

Social Security provides unceasing stability. It not only provides a foundation of income for 47 million retired working Americans, widows, and spouses, but also provides disability benefits for people who have gotten sick or injured and can no longer work, and it provides survivors benefits to children when a working parent dies or becomes too disabled to work. Altogether, 63 million Americans receive monthly Social Security benefits they have earned. It’s the most successful social program in the country, and it shows that the government can work.

We often hear that Social Security is severely underfunded, and that it won’t be around by the time my generation retires. However, this is not true. Social Security has enough money to pay 100% of benefits for another 16 years, and even without any changes, can pay 87% of benefits for another 50.

As Nancy Altman, President of Social Security Works (and Chairman of PRC’s Board of Directors!), wrote in an op-ed for the Los Angeles Times this week, this supposed “crisis” is not a crisis. Social Security has a “modest shortfall—projected to begin in 2035.” She points out in the article that “a majority of voters, regardless of political party, are willing to pay more to protect and expand Social Security” yet, despite the overwhelming support for this program, it has been over four decades since Congress last expanded the system.

We face many complicated issues related to retirement security in this country, but this is one of the easiest ones to fix! There is still plenty of time for Congress to pass legislation ensuring that my generation and those that come after will receive every penny of benefits we earn.

As Nancy says in the article, there is a looming retirement income crisis in this country – she points out that only 22% of today’s workers have traditional pensions, and nearly half of those 55 and older have no retirement savings. For this reason, Social Security is only becoming more important. Fewer and fewer people are participants in workplace retirement plans, and fewer and fewer people have any retirement savings at all. For a birthday present to Social Security – and to my generation and beyond – Congress should enact legislation that restores Social Security to balance the right way, by gradually increasing revenue and increasing benefits to make it adequate for those who depend on it the most.

The Social Security 2100 Act is critical for millennials and small business owners

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[The Hill] Expanding Social Security is critical for millennials and small business owners — and especially for millennial small business owners. 

We are co-owners of a small business, We Act Radio in the Anacostia neighborhood of Washington, DC. As small business owners and managers, one of whom is a millennial, one a Gen-Xer, and with mainly millennials as employees, we strongly support the Social Security 2100 Act.

This important legislation expands Social Security and ensures that all benefits can be paid in full and on time into the 22nd century. House Democrats, led by Rep. John Larson (D-Conn.), the chairman of the Social Security Subcommittee, have united around the Social Security 2100 Act. The legislation has 210 co-sponsors – nearly 90 percent of House Democrats.

In addition to being the co-founder of We Act Radio, Alex is also the executive director of Social Security Works, which has nine full time employees – all of whom are millennials or Gen-Xers. So, we’re very familiar with how the Social Security 2100 Act is structured. It increases Social Security benefits for everyone, fixes the formula for yearly cost-of-living-adjustments so that it reflects the real expenses beneficiaries face, and raises Social Security’s minimum benefit to 125 percent of the poverty level. It also ensures that Social Security remains strong for current and future generations, into the 22nd century. 

Republicans, led by Rep. Kevin Brady (R-Texas), are attacking the bill in predictable fashion: Manipulating numbers in an attempt to foment generational warfare and undermine all of our economic security, falsely claiming that this wise legislation will hurt millennials and small business owners, like us.

As small business owners, we are worried about increasing costs — especially health care and rent. But we are not at all worried about the modest and gradual payroll contribution increase in the Social Security 2100 Act. We are much more worried about the costs we will face if we do nothing to address the looming retirement income crisis.

Read more: The Hill

The New Politics of the Retirement Crisis

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It’s no surprise that 46 percent of Americans expect to be financially insecure when they retire, anticipating their government and employers will do next to nothing to help them. But these grim fears also open up a political opportunity.

As 18 million Baby Boomers brace for the financial insecurity of old age, Democrats are pushing to expand Social Security and other elderly benefits. Politicians who address retirement understand they can reach not only the elderly, but those who care for them. Few issues in American politics cut across so many constituencies, and affect the lives of so many.

The political calculus is changing. Read more: The New Republic »

Economic Insecurity Is Becoming the New Hallmark of Old Age

Image via The Nation

[The Nation] The United States is in the early stages of a crippling retirement crisis. Nearly half of all private-sector employees in the country—some 58 million people—had no company-sponsored retirement plan in 2018. As recently as 1999, only 39 percent of retiring workers were in this predicament. The retirement situation in the United States isn’t just bad; it’s getting worse with each passing year.

The crisis engulfs all kinds of workers: blue-collar teamsters, high-skilled professionals working for profitable corporations like Verizon and United Airlines, and public-sector civil servants in cities plagued by budget crises (read: Detroit). Many have lost their health insurance and pension benefits—and in some places, they’ve even been ordered to return payments that were miscalculated by pension authorities years in the past. An increasing number of people now work at jobs that never offered pension plans in the first place.

But it doesn’t have to be this way. We can face this country’s looming retirement crisis — and we can do something about it.

Full Story: The Nation »

6 Things Millennials Should Know About Social Security

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[Cross-posted from CBPP] Discussions of Social Security often pit younger workers against older retirees, but Social Security is actually an intergenerational compact that helps Americans of all ages — which explains its enduring popularity among all generations. There are 73 million millennials (now aged 23 to 38), most of whom are working, and they already benefit from Social Security in many ways and will continue to do so as they age.

Here’s what they should know:

  1. Many millennials have already benefited from Social Security. About 9 percent of millennials have received Social Security child benefits because a breadwinning parent died, became disabled, or retired, we’ve found. Those benefits lifted millions of those children out of poverty. Today, many millennials also receive benefits due to a life-changing disability or a spouse’s death, including about 360,000 disabled workers and 20,000 widowed mothers and fathers.
  2. Millennials will need Social Security — maybe sooner than they think. A young person starting a career today has a 1 in 3 chance of dying or becoming disabled before reaching Social Security’s full retirement age, which is rising to 67 in 2022. But many millennials don’t have adequate private life and disability insurance coverage, which Social Security provides. Roughly half of millennial households have no private life insurance coverage, our analysis of the Survey of Consumer Finances data shows. But 95 percent of workers have survivors insurance coverage from Social Security, which is equivalent to a life insurance policy worth over $725,000 in 2018 for a young worker with average earnings, a spouse, and two children, according to Social Security’s actuaries.
  3. Social Security will likely provide most of millennials’ income in old age. Most of today’s seniors receive most of their income from Social Security, and millennials will likely need the program even more.Millennials are much less likely than their parents to have traditional pensions, and not all of them are lucky enough to have a retirement savings plan at work, or an employer match if they do. Just a third of working millennials participate in an employer-sponsored retirement plan — while half of Generation X and baby boomers do — and their total wealth is lower than that of the previous generations at the same age. Social Security will be most millennials’ only guaranteed source of retirement income, not subject to investment risk or financial market fluctuations.
  4. Social Security’s intergenerational benefits help millennials achieve financial independence. Rising higher education and child care costs, combined with slower earnings growth, create more financial pressure for millennials than their parents likely experienced as young adults.In addition to the Social Security benefits they earn themselves, the program helps relieve millennials of the responsibility to support parents or other family members when they retire or become disabled, or when a breadwinner dies. Because these family members have Social Security, millennials can use their incomes to establish households, have children, pursue education, and start businesses. Social Security is especially important for families of color, who have lower earnings, less workplace pension access, and higher rates of disability and premature death, on average.
  5. Millennials are willing to pay more to strengthen Social Security — and the contributions required are manageable. Seven in 10millennials agree that it’s crucial to preserve Social Security, even if it means contributing more — and, like Americans of all ages, their first choice would be to lift the cap on wages subject to payroll taxes, which is now $132,900. Even if policymakers filled Social Security’s entire long-term shortfall by raising the combined 12.4 percent employee/employer payroll tax rate for all workers, it would cost a typical worker earning $50,000 another $25 per biweekly paycheck, matched by another $25 from his or her employer.
  6. Fixing Social Security’s finances will likely boost millennials’ confidence in the program. Millennials are famously anxious about whether Social Security will exist when they retire — which is unfounded but not surprising, since millennials have heard myths about the program’s future their entire lives. In fact, Social Security is adequately financed in the short term and faces a modest long-term shortfall of about 1 percent of gross domestic product (GDP). Policymakers should strengthen Social Security’s finances mostly by raising its revenues, because Social Security benefits are modest even though, as noted above, they comprise the principal source of income for most beneficiaries. Strengthening the program’s finances could help put these myths to rest, so millennials can feel more secure about their Social Security.

How Can the U.S. Salvage Social Security?

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Social Security isn’t going bankrupt. Even after 2034 (when the Trust Fund is projected to be fully depleted) benefits will still be paid — but it may not be able to pay all of what retirees put in and were promised. And that, according to many polls, is very important to many Americans both young and elderly.

What to do? In short, there are two options: 1) increase revenues or 2) cut benefits. But figuring out which is fairer — and most likely to make it through Congress — is something economists, politicians, and policy makers have all disagreed on.

The Atlantic’s Bouree Lam explores some of the most frequently posed policy solutions for Social Security in this handy explainer. Keep it nearby for the upcoming Democratic Primary Debate!

Opinion: Should we be worried about Social Security going bankrupt?

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Before you answer that question, consider what Mark Hulbert, columnist for MarketWatch, has to say:

The future is unknowable, and uncertainty can certainly be scary. But in a ranking of things to worry about, I would place a number of other uncertainties far higher than whether Social Security “will be there for me.” How will the stock market perform over the next few decades, for example? Is much higher inflation about to rear its ugly head? Where are interest rates headed?

The impact of a wrong answer on any of those questions is definitely something worth worrying about.

In the meantime, it’s simply not accurate to say there is a Social Security crisis, in the sense of “a sudden change” or a “turning point,” to quote the standard dictionary definitions of crisis. There is nothing about Social Security’s finances today that hasn’t been known for decades.

In fact, Andy Landis, author of “Social Security: The Inside Story” and a former Social Security Administration representative, tells me that in 1983, after the last time Congress made changes to Social Security’s funding mechanisms, its actuaries projected that the system would be able to meet all obligations until the mid-2030s. So it’s hardly a surprise to “discover” today what has been known for four decades. There’s no more of a Social Security funding “crisis” now than at any point since the mid-1980s.

It is true that, unless further funding changes are instituted, the Social Security trust fund will need additional funding in 2034. Note, however, that this prospect is analogous to the situation that faced Social Security in the early 1980s; like now, for many years before then, projections had shown that the system would eventually run out of money. The 1983 amendments to Social Security, which resolved the funding shortfall, weren’t finally approved until just four months before when the system would otherwise have run out of money.

There’s more sound thinking in Hulbert’s column — read the whole thing here.