Surprise! Social Security has gotten healthier

Image: Alpha Stock Images via Picpedia.org/Creative Commons, http://www.picpedia.org/clipboard/images/social-security.jpg

The crux of the conservative attack on Social Security in recent years has been the claim that the program is on an unbroken path to insolvency. Monday’s release of the Social Security trustees’ annual report knocks a pillar out from under that campaign, for it shows that the program actually got healthier during the last year.

The trustees predicted that the program’s reserves — that is, the trust funds of its retirement and disability components — will be exhausted in 2035. In last year’s report, the trustees pegged that date at 2034. In other words, the trust funds’ exhaustion last year was 16 years away; this year it’s still 16 years away.

To use a different metric, the cost of making Social Security perfectly solvent has come down. Last year, the trustees projected that it would require an immediate increase in the payroll tax of nearly 2.8 percentage points, bringing the tax to 15.18% (shared by employers and employees), up from the current 12.4%; this year that estimate came down to 2.7 percentage points, bringing the required payroll tax rate to 15.1%.

The trustees also revised their near-term expectations. Last year’s report, which was based on 2017 statistics, warned that the system would be paying out in benefits more than it took in starting in 2018. The shortfall was projected to be more than $1 billion of the annual program budget of about $1 trillion, and would mount steadily into the limitless future, unless changes were made in benefits or taxes. This year’s report says the program actually was in the black last year, by more than $3 billion, and won’t have to start drawing down its reserves until 2020.

We’ll get to the main reason for the improvement in a moment. But the bottom line is positive. “This year’s trustees report shows that, contrary to conservative propaganda, Social Security is not ‘going bankrupt’ or ‘in peril,’” Max Richtman, head of the National Committee to Preserve Social Security and Medicare, said after the report’s release.

These are incremental improvements, to be sure. But they underscore an important point: Social Security’s fiscal condition is dynamic. It’s dependent on a host of interrelated economic and demographic factors, many of which are fundamentally unpredictable even a few years into the future, much less 16 years. Pundits who tell you they know what’s going to happen are blowing smoke.

Read the rest: Los Angeles Times

For first time in years, Congress actively planning to improve Social Security

2019 Trustees Report shows strong bottom line, low cost

The just-released 2019 Social Security Trustees Report lands with a thud – literally – because it’s 270 pages long. But fear not, the key takeaways are straightforward:

There is still much room for improvement, both to Social Security’s finances and its benefits. While it’s common for pundits to state that Congress has no plan to address Social Security’s projected shortfall, that is no longer correct.

It is true that Congressional Republicans have no plans – at least, none they seem willing to publicly embrace. Perhaps that is because their preferred “solutions” involve cutting benefits, which is overwhelmingly opposed by voters across the political spectrum.

By contrast, congressional Democrats have introduced several measures. Two of them – the Social Security 2100 Act, introduced by Rep. John Larson (CT), and Social Security Expansion Act, introduced by Sen. Bernie Sanders (VT) – merit special mention. Both bills would not only ensure all promised benefits are paid in full and on time for the foreseeable future – they would also implement more sensible cost-of-living adjustments for seniors, increase Social Security’s modest benefits, and lift the cap on taxable earnings to ensure the wealthy pay their share.

Rep. Larsen has already held hearings on his bill, and Social Security’s future more broadly — and if you’re looking for further confirmation that Democrats are serious about improving Social Security, there’s also this: nearly every 2020 presidential candidate serving in Congress is a member of the bicameral Expand Social Security Caucus.

As well they should! With over half (52 percent) of American households headed by someone of working age who will not be able to maintain their standards of living in old age (rising to roughly two-thirds when health and long-term care costs are also considered), expanding and improving Social Security is the obvious solution to a looming retirement income crisis.

Workers, if they’re lucky, have 401(k) and other retirement savings plans, which studies have proven inadequate, while traditional employer-sponsored defined benefit pension plans are disappearing. Around half of households aged 55 or older (46 percent) had zero retirement savings in 2016. Indeed, 41 percent of American households headed by someone aged 35 to 64 is projected to run out of money in retirement.

It wouldn’t take much of an increase to the average Social Security check to make a big difference to Americans. Social Security’s benefits are modest: the average amount received by Social Security’s over 63 million beneficiaries was only about $16,000 over the past year.

We can do better. Social Security’s benefits are (nearly) universal, the program is incredibly efficient, and the benefits are guaranteed. The case for expanding and improving the program is overwhelming. The question of whether to do so isn’t about affordability – it’s about our values as a nation, and those of whom we elect to represent us in office.

Five Republican Myths Employed at Recent Social Security Hearings

Authored by Nancy Altman, President, Social Security Works

Representative John Larson (D-CT), Chairman of the Social Security Subcommittee of the House Ways and Means Committee, is holding historic hearings on expanding Social Security. These are the first such hearings in nearly half a century. At the hearings, Republican members of Congress are cloaking their desire to cut Social Security in dulcet tones of bipartisanship. In doing so, they are spreading damaging myths about Social Security. Here is the truth regarding the following five claims pushed by Congressional Republicans in these hearings:

  1. Claim that to be bipartisan, Democrats must agree to Social Security benefit cuts –though even the Republican base rejects cuts and wants benefits expanded

Two comprehensive legislative Social Security proposals have been introduced in the current Congress so far. The Social Security 2100 Act, sponsored by Representative John Larson (D-CT), has over 200 cosponsors; the Social Security Expansion Act, sponsored by Senator Bernie Sanders (I-VT), is cosponsored by a who’s who of leading contenders for the Democratic presidential nomination, including Senators Elizabeth Warren (D-MA), Cory Booker (D-NJ), Kirsten Gillibrand (D-NY) and Kamala Harris (D-CA). Both bills, which have companions in the other chamber, increase benefits for every current and future Social Security beneficiary. They also restore Social Security to long-range actuarial balance: the first, for three-quarters of a century; the second, for half a century.

Senator Bernie Sanders (left), D-Vermont, and Rep. John Larson (right), D-Conn. have each introduced legislation to protect and expand Social Security. (Sanders photo by Phil Roeder via Flickr Creative Commons, https://flic.kr/p/yT4bRv, Larson photo via Wikimedia Commons)

Neither bill has a single Republican cosponsor. Nevertheless, what the Democrats are proposing is fully bipartisan. It is bipartisan in the way that matters. An overwhelming majority of Republican voters, according to poll after poll, support what the Democrats are proposing.

Just a few weeks ago, on March 21, the Pew Research Center released a poll showing that 68% of those identified as Republican/Lean Republican believe that Congress should make no cuts to Social Security whatsoever. A year ago, in the lead-up to the 2018 midterm elections, Public Policy Polling found that 56% of those who voted for Donald Trump and 55% of those who identify as Republican would be more likely to vote for a candidate who “supported expanding and increasing Social Security.”

Furthermore, a 2014 National Academy of Social Insurance survey found that 80% of Republicans believe that Social Security is more important than ever; 72% of Republicans responded that they “don’t/didn’t mind paying Social Security taxes;” and 65% of Republicans agreed that “we should consider increasing Social Security benefits.”

Perhaps most striking, the same National Academy poll found that 69% of Republicans supported “increasing the Social Security taxes paid by working Americans,” if needed to “preserve Social Security benefits for future generations.” That percentage increased to 71% when the question was whether “top earners” should pay more.

Talk of bipartisanship by Republican politicians simply cloaks their desire for cuts. Representative Larson called out the hypocrisy in an early hearing: “Gee, you know, funny thing, we introduced [the Social Security 2100 Act] 6 years ago, and we couldn’t even get a public hearing on it for 6 years. And so the ‑‑ let’s say the spirit of bipartisanship was a little waning.”

Continued on Forbes.com »

The Republican proposal for paid family leave is a sham that would wreck your retirement

Sen. Joni Ernst, R-Iowa, has a plan to let you raid your Social Security to pay for parental leave. Don’t buy it.

Republican Sens. Joni Ernst of Iowa and Mike Lee of Utah have been beating the drums for their “Cradle Act,” a proposal to institute up to 12 weeks of paid leave for new parents.

They’ve been draping their proposal in all sorts of uplifting words about the virtues of family leave — the bonding of mothers, fathers and offspring, the long-term benefits for children and so on.

But they’ve concealed the chief drawbacks of their plan, which are the same features that make it palatable to a GOP constituency: It would undermine Social Security, force seniors to work longer, and carry hidden costs that wouldn’t be evident until it’s too late.

We analyzed this plan last April, when it was being pushed by Ivanka Trump and Sen. Marco Rubio, R-Fla., while Ernst and Lee were standing by in the wings. It was a dumb, even dangerous idea then, and that hasn’t changed. It’s a poisoned chalice, and you shouldn’t drink from it.

The GOP plan contrasts sharply with a Democratic plan offered by Rep. Rosa DeLauro of Connecticut and Sen. Kirsten Gillibrand of New York. Their Family and Medical Leave Act would extend benefits not only to new parents but to workers facing serious medical conditions or the necessity of caring for a family member. It would be funded by payroll contributions of .4 percent of wages — two cents per $10 of wages — split between employers and employees.

Moreover, it evades the question of why Social Security needs to be dragged into a program of this sort at all.

Full story: LA Times

GOP lawmakers offer paid parental leave legislation — funded by your Social Security benefits

Photo: 401(K) 2012 via Flickr Creative Commons: https://flic.kr/p/ayZi8V

The latest Republican plan for paid family leave is basically this: spend some of your Social Security benefits when you have a child — then, when your Social Security benefits aren’t sufficient for retirement, you can just move in with your (now adult) kid.

It’s politically tone-deaf and utterly lacks any connection to the daily lives of working people — but Republicans actually do have one part of this right: the Social Security Administration is a great place to set up a national paid family leave program — overhead is very low, staff and infrastructure are already in place, etc.

But the way to pay for it is…wait for it…to actually pay for it instead of making workers borrow from their future benefits — like Kirsten Gillibrand, Democrat of New York, proposes. People shouldn’t have to choose between paid leave and receiving Social Security when they retire.

Full story: The Hill

On Social Security, Democrats Have The Courage Of Their Convictions. Republicans? Not So Much

Rep. John Larson (D-CT) is opening up a true public dialogue on the future of Social Security. (Image: DonkeyHotey via Flickr Creative Commons, https://flic.kr/p/dKmSQx)

This week, Rep. John Larson (D-CT), chair of the Social Security Subcommittee of the House Ways and Means Committee, held two historic hearings on expanding Social Security benefits. These were the first hearings on Social Security expansion in nearly half a century.

These hearings represent a return to transparency and regular order, an important development for anyone who cares about the future of the American people’s pension, Social Security.

In addition to holding hearings, Representative Larson recently introduced the Social Security 2100 Act along with over 200 of his fellow Democrats. This wise legislation expands Social Security’s modest benefits while ensuring that all promised benefits will be paid in full and on time through the year 2100 and beyond.

Under Larson’s leadership, Democrats are holding public hearings and, presumably, plan to record their votes on the issue in the Ways and Means Committee and the House floor. This presents a sharp contrast to the infamous Bowles Simpson Commission, the so-called Super Committee and other closed door, fast track efforts that attempted to cut Social Security’s modest benefits in secret so that the American people would have no way to hold their elected leaders accountable.

It also is a stark contrast to the House Republicans when they were in the majority. For years, Larson, as ranking Democratic member of the Social Security subcommittee, requested the kind of hearings that he held this week. But as long as Republicans held the House majority, they refused.

Now that Larson has the gavel, his Republican colleagues emphasize the so-called need for “bipartisanship” on Social Security. What they really seem to be saying, from their performance at the recent hearings, is that they want Democrats to give them political cover to cut benefits so that they are free from accountability at the ballot box.

Read more – full story at Forbes.com

Inequalities in workplace retirement plan access and eligibility driving persistent retirement savings gap for Latinos

A recent report finds that inequalities in access and eligibility for employer-sponsored retirement plans are contributing to persistent retirement savings gaps for Latinos. As a result, Latinos are falling even further behind in preparing for retirement. Only 31 percent of all working age Latinos participate in workplace retirement plans, resulting in a median retirement account balance equal to $0.

Download full report here.

These findings are contained in new research, Latinos’ Retirement Insecurity in the United States, from the National Institute on Retirement Security (NIRS) and UnidosUS. Download the full report here.

“Most Americans are far off-track when it comes to preparing for retirement, and this report offers an even grimmer outlook for Latinos. The retirement divide can begin to close if more Latinos have access to retirement plans and are eligible to participate,” said Diane Oakley, NIRS executive director. “State-sponsored retirement plans that are taking hold across the nation also can play a big role in improving the retirement outlook for Latinos. Such plans target working Americans who lack access to employer-sponsored retirement plans, and less than half of Latino employees in the private sector have access to such plans,” Oakley added.

The research finds that:

  • Access and eligibility to an employer-sponsored retirement remains the largest hurdle to Latino retirement security.
  • The retirement plan participation rate for Latino workers (30.9%) is about 22 percentage points lower than participation rate of White workers (53%).
  • When a Latino has access and is eligible to participate in a plan, they show slightly higher take-up rates when compared to others races and ethnicities.
  • For working Latinos who are saving, their average savings in a retirement account is less than one-third of the average retirement savings of White workers. Overall, less than one percent of Latinos have retirement accounts equal to or greater than their annual income.

The report indicates that policy options that would greatly benefit Latinos are as follows:

  • Expand Plan Eligibility for Part-Time Workers. Given that top reason that Latinos did not have retirement savings was that they worked part-time. Allowing part-time workers the ability to participate in employer-sponsored retirement plans would greatly increase the number of Latinos that could save in a retirement plan.
  • Promote the Saver’s Credit. The Saver’s Credit is a non-refundable income tax credit for taxpayers with adjusted gross incomes of less than $31,500 for single filers and $63,000 for joint filers. Given that the median household income for Latinos was $46,882 in 2016, a large number of Latino households would qualify for the Federal Saver’s credit if they saved for retirement. By further promoting the credit, many more Latino households could be rewarded for saving for retirement.
  • Promote and Further Develop State Retirement Savings Plans. In 2014, an estimated 103 million Americans between 21 and 64 did not have access to an employer-sponsored retirement account. In response to this gap, a number of states have enacted state-sponsored retirement savings programs that automatically enroll individuals into a plan if they are not covered by an employer-sponsored plan. For Latinos, these plans are especially important. State retirement savings plan can assist with providing low-cost retirement products to working Latinos who are not covered by a workplace retirement plan, helping to alleviate the current retirement savings crisis that Latinos face.

Latinos lead population growth in United States, accounting for 17.8 percent of the total U.S. population and numbering over 57.5 million. As the largest minority group in the U.S workforce, Latinos comprised 16.8 percent of the labor force in 2016.The U.S. Census Bureau estimates that by 2060, the Latino population will number 119 million and will account for approximately 28.6 percent of the nation’s population. Additionally, the U.S. Administration on Aging predicts the Latino population that is age 65 and older will number 21.5 million and will comprise 21.5 percent of the population by 2060.