Posts Tagged ‘social security’

Who Are the 47 Percent?

Thursday, October 18th, 2012

Will the real 47 percent please stand up?  Although Republican presidential candidate Mitt Romney in a now famously leaked video suggested that nearly half of Americans believe that they are victims for relying on Social Security, Medicare, Medicaid, unemployment benefits, etc., we thought it might be helpful to look at who benefits the most from government largesse.

Writing in The New Yorker, columnist James Surowiecki notes that, “Even as he assails people on Medicaid and Social Security, and those who receive the earned-income tax credit, for being dependent on government, Romney didn’t mention another prominent group that’s dependent on government: the American companies whose profits rely, in one form or another, on government assistance.”

Historically, the federal government has protected American business with high tariffs, land grants given to railroads, and more than 80 million acres both onshore and offshore leased to energy companies.  An 1872 law still in effect lets mining companies lease federal land for just $5 an acre while keeping the profits from all the gold, silver or uranium they find.  Renewable-energy companies are subsidized; farmers receive nearly $5 billion a year in direct payments and billions for crop insurance and drought aid despite record-high food prices.

As currently written, the tax code helps business.  American manufacturing enjoys a $20 billion annual tax break, while state and local governments cough up $70 billion a year to lure companies or prevent them from moving away.  While this strategy creates new jobs in a given locale, some see the incentives as giveaways to help companies move from one state to another.  Another form of assistance is government regulations which can boost corporate profits, especially copyright law, patent protection and intellectual-property rights.  According to economist Dean Baker, patent protection is worth hundreds of billions of dollars a year to the pharmaceutical industry alone.

Realize that we are not taking side. We simply want to suggest that government assistance exists on both the 53 percent and 47 percent side of this electoral divide.  Surowiecki says that corporate welfare isn’t necessarily a bad thing. Some of these giveaways arguably do a lot of good. But companies that benefit from these policies are just as dependent on the government as the guy who gets the earned-income tax credit.

Meet the Very First Baby Boomer

Wednesday, June 8th, 2011

Social Security Commissioner Michael Astrue calls it “America’s silver tsunami.”

The name Kathleen Casey-Kirschling likely doesn’t ring any bells with the majority of Americans.  She holds the singular honor of being the nation’s very first baby boomer, born one minute after midnight on January 1, 1946 in Philadelphia celebrating her 65th birthday on New Year’s Day.  A retired teacher, Casey-Kirschling is the first of approximately 78 million baby boomers who will begin collecting Social Security and Medicare benefits over the next 20 years.  The Pew Research Center reports that approximately 10,000 baby boomers turn 65 every day.  Baby boomers, who were born between 1946 and 1965, are celebrating their 65th birthdays between 2011 and 2030.  Despite a recent Pew survey that found baby boomers feel more downbeat than other generations about their future, Casey-Kirschling is taking a positive approach.  “I’m OK with knowing that I don’t know what tomorrow will bring,” she said.  “I’m going to live for today.  And I’m thankful that I could live for today, and I am healthy.”  Casey-Kirschling retired at 60 and began taking her Social Security benefits at age 62.

In an interview with AARP at the time of her retirement, she said “I don’t work compulsively anymore.  My priorities are now family and friends, and if something’s not fun, I don’t want any part of it.”  Today, the New Jersey resident works part-time, travels with her husband, and spends time with her children and grandchildren.  Because Casey-Kirschling opted to start collecting Social Security at age 62, she receives only about 75 percent of the total amount for which she was eligible –approximately $240 less per month.  If Casey-Kirschling had waited until her 66th birthday, she would have received full benefits; at age 70 she would have received 135 percent of full benefits.

When asked how she deals with her celebrity, Casey-Kirschling said “In the beginning, it was overwhelming.  But I said I’m just going to be who I am and do what I can, especially for Social Security.  They asked me to do public service (ads) for the generation and help baby boomers apply (for benefits) online and get direct deposit.  Whatever I could do, I would try to have a positive impact.  So many things are negative in the nation today.  Like all human beings, we are not a perfect generation.  We certainly created so much, built so much and have an incredible work ethic to this day.”

Like many of her fellow boomers Kathy leads a full and busy life,” said Jim Courtney, Social Security Deputy Commissioner for Communications.  “By choosing direct deposit, Kathy’s benefit is safely and conveniently deposited into her bank account.  No matter where in the country – or the world – Kathy is, her money is as close as the nearest ATM or just a mouse click away through online banking.”

David Walker, formerly the comptroller general of the Government Accountability Office, Congress’ legislative arm, warned that before too long, the Social Security system will have more recipients than it can afford to pay out “We face a tsunami of spending due primarily to the retirement of the baby boom generation and rising healthcare costs,” Walker said.  “So what’s happened is we’ve gone from 16 workers paying into Social Security for every person drawing benefits in 1950 to 3.3 to one today, and we’re going down to two to one by the time the boomers retire in big numbers and that’s about where it will stay over the long run.”

“I think I’m just lucky to be at the top of the boom.  I’m just one of many millions and am blessed to have been in this generation and really blessed and to take my Social Security now,” Casey-Kirschling said.

Nearly Half of Americans Have Saved Only $25,000 For Retirement

Wednesday, April 13th, 2011

Americans’ confidence in having adequate money to retire on has hit a 20-year low, according to a survey by the Employee Benefits Research Institute (EBRI).  “We’re getting the most pessimistic results we’ve ever seen,” said Jack VanDerhei, EBRI’s research director and the study’s co-author.  “Those that are not well prepared are finally starting to get it.  The bad news is they’re not really reacting to it yet,” VanDerhei said.  “Hopefully this will be something that in the future will generate more savings.  People were shell shocked to some extent by what was going on in 2008 and 2009,” said VanDerhei.  “Many people wouldn’t even open their 401(k) statements when they came every quarter because they were too afraid to look.”  Now these same people are determining if they have adequate money saved.  This pessimism is despite the fact that the average balance of a 401(k) account rose to $71,500 at the end of 2010, an increase of approximately 11 percent when compared with 2009, according to Fidelity Investments.

Approximately 27 percent reported that they have little confidence about the amount of their retirement savings, an increase over the 22 percent reported last year.  The increase was driven by people with less than $100,000 in savings, according to the report.  The percentage of those with less than $25,000 in savings who lack confidence about having enough money in retirement soared to 43 percent in 2011, an increase from the 19 percent reported in 2007.  Five percent reported that their savings totaled more than $100,000, about the same as 2007.  Nearly 1,000 workers and 250 retirees aged 25 and older were interviewed for the survey.  EBRI has conducted the survey since 1990.

High unemployment rates, the size of the federal deficit, rising healthcare costs, lower returns on investment and worries about Social Security and Medicare funding have forced Americans to redefine retirement, VanDerhei said.  Regulators and legislators are examining the risk of Americans outliving their savings as life expectancies increase and funds have shifted from traditional pension plans to defined-contribution plans such as 401(k)s.  The Labor Department is examining whether it should be easier for employers to add annuities to retirement accounts.  Senator Jeff Bingaman (D-NM) re-introduced legislation that would require 401(k) plan sponsors to inform workers of the projected monthly income they can expect at retirement based on their current account balance.

Not all the news in the EBRI study is bad. “In the past, investors in general were clueless about how big of a nest egg it takes to accomplish their goals,” said Harold Evensky, a Coral Gables, FL, financial planner.  “The silver lining of going through a bad economy is that people are substantially more realistic about what they need to do.”  Although the majority of people have not yet made major changes, at least 62 percent say it is possible for them to save $25 a week for retirement. One expectation may need to be adjusted.  Among the 1,004 workers surveyed, 74 percent plan to work in retirement to supplement their savings, but just 23 percent of the 254 retirees surveyed say they have worked in retirement.

Tools are available online to help Americans saving for retirement determine how far they are on the road to financial stability.  Generally speaking, financial planners suggest putting away between 11 and 15 percent of each paycheck for retirement.  Additionally, the Department of Labor’s website has a section called “Top 10 Ways to Prepare for Retirement”.

Dodd-Frank Bill Collides Head On With Deficit Realities

Wednesday, February 9th, 2011

Implementation of the historic Dodd-Frank bill – which President Barack Obama signed into law last July to regulate Wall Street against the excesses that led to the Great Recession — is in danger of being gutted if Republicans’ proposed deep spending cuts become a reality.  Representative Barney Frank (D-MA) pointedly criticized Republicans’ proposal to slash government spending to 2008 levels. According to Frank, that is not an option because the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) need funding to hire hundreds of employees to write and issue regulations to give the new law teeth.  Frank co-sponsored the bill with former Senator Christopher Dodd (D-CT).

Unfortunately, the positive things that Dodd-Frank was designed to accomplish have run head on into the non-partisan Congressional Budget Office’s (CBO) bleak warning about the direction of the nation’s debt.  According to NPR  Planet Money correspondent David Welna, “It was not a pretty picture that CBO director Douglas Elmendorf painted as he sat before the budget committee”. This year’s deficit, he said, will be nearly $1.5 trillion dollars, nominally the largest in history.  And if the tax breaks that got extended this year continue throughout the next decade, Elmendorf said the nation’s debt would grow to be the size of its economy, something that hasn’t happened since the end of World War II.  The time to do something about it, he told the grim-faced panel of senators, is now.”

Elmendorf warned that “The longer the necessary adjustments are delayed, the greater will be the negative consequences of the mounting debt, the more uncertain individuals and businesses will be about the future government policies, and the more drastic the ultimate policy changes will need to be.”  Senator Kent Conrad (D-ND), chairman of the Senate Budget Committee, said “The thing that makes the most sense is there is a summit between the White House, leaders in the House and the Senate, because at the end of the day, the White House has got to be at the table. And unfortunately, during the budget process, the president is left out.”  NPR’s Welna continues, “The revenue side of the equation, of course, is taxes and raising them has been a taboo topic for most in the GOP.  But the likely need for more revenues was underscored toward the end of today’s hearing when Conrad noted that the Social Security surplus that lawmakers have been raiding for years disappeared this year and instead, Social Security has started cashing in its IOUs with the Treasury.”  Social Security will post nearly $600 billion in deficits over the next 10 years as the economy recovers and millions of baby boomers begin retiring, according to new congressional projections.

House Republicans, led by Representative Scott Garrett (R-NJ), chairman of the House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises, wants to cut $55 to $60 billion in non-defense spending during fiscal year 2011.  “A dramatic spending increase to fund the SEC and CFTC, as envisioned by the authors of the Dodd-Frank legislation, would further the mindset that our nation’s problems can be solved with more spending, not more efficiency,” according to Garrett.  Frank countered that Garrett’s comments only reinforce his “fear that Republicans are attempting to cripple regulation by failing to fund it.  I had thought even among people in the Tea Party that credit default swaps were not that popular.  We’re arguing the security of the average American was far more endangered by the financial crisis than by a lot of other things that our military does.”

If the cuts are put into place, the SEC and CFTC would be frustrated in their mandates, such as setting up a new office of municipal securities, according to Frank.  The Republican response to Democratic concerns is that their goal is to make federal regulators more efficient.  Representative Spencer Bachus (R-AL), chairman of the House Financial Services Committee, said “Past experience indicates that a few investigative reporters have been more effective than the many employees at the SEC in addressing and exposing financial wrongdoing.”

Illinois Ranks Dead Last in List of Retirement Paradises

Wednesday, December 29th, 2010

retirement_imageIllinois ranks as the nation’s worst state to retire in,  according to a study by The nine other losers include California, New York, Rhode Island, New Jersey, Ohio, Wisconsin, Massachusetts, Connecticut and Nevada.  John Brady,’s president, says the 10 states belong on this list because of their fiscal health (poor), taxation (high) and climate (the majority have cold, snowy winters).  The Pew Center for States has described six of the 10 as being in “fiscal peril”.  These states include Arizona, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island, Wisconsin and California.

Illinois’ position at the bottom of the list is due to the state’s grim fiscal health, which Brady describes as possibly the worst of any state.  The report, entitled “Beyond California:  States in Fiscal Peril”, demonstrates that “some of the same pressures that have pushed California toward economic disaster are wreaking havoc in a number of other states, with potentially damaging consequences for the entire county.”  Regarding Illinois, Brady notes that “It even borrowed money to fund its pension obligations.”  In terms of California, Brady notes that although it has an enviable climate, the cost of living is expensive and the state’s finances are a shambles – even paying some bills with vouchers.  Although New York state’s finances are in fairly good condition, it has the nation’s second-highest tax burden and the fifth-highest property taxes, as well as a “dysfunctional state legislature.”

One surprising finding was that – despite its affordable housing prices, due in part to a high number of foreclosures – Nevada was deemed the 10th worst state for retirement.  As the nation’s home foreclosure capital, Nevada in 2010 saw one in every 79 homes in foreclosure,  according to RealtyTrac.  Although Brady admits that the state has some financial problems, the positive news for retirees is that Nevada does not have a state income tax.

“Every individual has to consider his or her own criteria for selecting a list of the worst or best states to retire,” Brady concluded.

Americans Are Slow to Fill Their Retirement Nest Eggs

Thursday, April 22nd, 2010

25 percent of Americans have saved less than $1,000 for their retirement.  One-fourth of American workers have saved less than $1,000 for their retirement, according to a report from the Employee Benefit Research Institute (EBRI).  The EBRI survey reveals that 27 percent reported saving less than $1,000 for retirement, not counting the value of their home or defined-benefit plans.  A similar percentage reported saving between $1,000 and $24,999 for retirement.  An additional 23 percent had saved between $25,000 and $99,999; just 11 percent saved more than $250,000.

Younger employees have time to build their nest eggs, but the 11 percent may be the only group who have saved adequately to live out their retirement in comfort.  The last three years has seen a sharp decline in the percentage of people who said they were “very confident” about their financial security in retirement.  That statistic fell to 16 percent compared with the 27 percent reported in 2007.  In the survey, 38 percent said they are somewhat assured they will be able to live comfortably after retirement.  Less than 50 percent expressed concern about their readiness for retirement.

Even with the lack of personal savings, the survey found that the majority of respondents planned to rely on retirement income from sources like Social Security or company pensions.  The increase in 401 (k) programs and decline in defined-benefit plans assures that more people will have to rely on their own savings to see them through retirement.

Two-thirds of survey respondents reported that they felt they were doing a good job of preparing for retirement, while two thirds were very or somewhat confident of their efforts.