Social Security

1
The Retirement Income Crisis of Baby
Boomers Policy and Politics  Prepared
for The Future of Retirement Security, the
Entitlements and the U.S. Political
Economy Annual meeting of The Gerontological
Society of AmericaNew OrleansSaturday, November
23, 2013 Eric KingsonProfessor of Social
WorkSyracuse University School of Social
Workerkingso_at_syr.edu

2

Modest shift in the politics of Social
Security With implications for Baby Boomers
those who follow

• Evidence of shift
• Why this is happening now
• Why Social Security is the Solution
• One expansion plan

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Evidence of shift?

• Until now, framed almost exclusively as every
  knows
• Choice How much to cut?
• Strong, growing opposition to benefit cuts
• Labor, Netroots, Aging, Womens, Veterans, other
• Chained-CPI
• Subtle change in way press explains Chained-CPI
• May be becoming toxic (e.g., Steve Forbes)
• Growing number of congressional champions
• Expansion bills
• Slow legitimization of expansion as requiring
  serious discussion
• Modest changes in how mainstream treats issue
  (e.g., NY Times, MSNBC, Washington Post)

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Bills growing number of sponsors

• Strengthen Social Security Act of 2013
• S 567 (Sen. Harkin/Sen. Brown)- 3
• HR 3118 (Rep. Sanchez (CA)) - 40
• Protecting and Preserving Social Security Act
• S 308 (Sen. Begich)- 2 HR 649 (Deutch)- 27
• Keeping Our Social Security Promises Act
• S 500 (Sen. Sanders)- 11
• HR 1029 (Rep. DeFazio)- 30
• Social Security Enhancement and Protection Act of
  2013
• HR 1374- (Rep. Gwen Moore) - 1

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• Americas overall retirement system is in big
  trouble. Theres just one part of that system
  thats working well Social Security. And this
  suggests that we should make that program
  stronger, not weaker Realistically, Social
  Security expansion wont happen anytime soon. But
  its an idea that deserves to be on the table
  and its a very good sign that it finally is.
  (Paul Krugman, 11/22/13)
• The conversation about retirement and Social
  Security benefits is not just a conversation
  about math. At its core, this is a conversation
  about our values. It is a conversation about who
  we are as a country and who we are as a people
  This is the moment when we talk about expanding
  Social Security.
• (Sen. Elizabeth Warren 11/18/13 Senate Speech
  Rachel Maddow Show)

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Why this happening now
Favorable organizational and political changes
Real Retirement Income Crisis
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Why this is happening now

• Labors all in
• Electronic advocacy groups
• Traditional advocacy groups
• Creating a Buzz about Expanding Benefits
• Organizations put forth proposals
• Social Security Modernization Commission
• Womens Center for Community Change
• Latinos for Secure Retirement
• IWPR/NCPSSM/NOW
• Social Security Works
• Alliance for Retired American field focus
• October 31 Conference on expanding protections
• Growing number of Congressional champions
• New Senate and House Proposals
• Protecting expanding SS Good Policy, Good
  Politics

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Indicators of Retirement Income Crisis

• 2/3rds unable to maintain standard of living in
  retirement (NRRI)
• 6.6 trillion retirement income gap, ages 32-64
  (Pension Rights Center)
• Declines in household wealth from 66 trillion in
  2007 to 58 trillion in 2011
• Median income of households headed by person
  55-64 dropped from 61,700 in 2009 to 58,626 in
  2012
• 38.3 million working-age households (45) do
  not have any retirement account assets (NIRS)
• Four out of five working households have
  retirement savings less than one times their
  annual income (NIRS)
• 54 of 45-54 report being totally unprepared for
  retirement (2011 Alliance Life Insurance Survey)
• Declining confidence in ability to afford
  retirement

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Surveys show very low confidence in ability to
afford comfortable retirement
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Causes of Retirement Income Crisis

• Failure of 401 (k) system Loss of defined
  benefit plans
• Social Security Benefit cuts resulting in
  declining Social Security Replacement Rates
  (even lower when Medicare Premiums counted)
• Loss of home equity
• Stagnant wages
• Health care costs

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Retirement Plan Participation trends show a shift
from defined-benefit pensions to
defined-contribution plans
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Source Chart of the Day Our Vanishing Home
Equity, Business Insider , May 15, 2009
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Why Social Security is the Solution
The one part of the retirement income system that
is working
Most realistic mechanism for addressing crisis
The nation can afford to address expand Social
Security retirement income and family protections
while addressing projected shortfall
A matter of values politics, not economics
17
Source Social Security Administration, Income of
the Aged Chartbook, 2010 http//www.ssa.gov/polic
y/docs/chartbooks/income_aged/2010/iac10.pdf
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Increased work effort at older ages
A partial solution for some
Source Federal Interagency Forum on
Aging-Related Statistics, Older Americans 2012
Key Indicators of Well-Being
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Social Security Works All Generations Plan
Four Points

• Social Security as solution
• Financing is a means, not an end
• Nation can afford to strengthen
• Values matter

• Addresses Nations Retirement Income Crisis
• Strengthens Family Protections
• Secures Social Securitys Financing

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Social Security Works All Generations Plan 1
Current projected 75 year shortfall as a percent of taxable payroll 2 -2.72 Current projected 75 year shortfall as a percent of taxable payroll 2 -2.72 Current projected 75 year shortfall as a percent of taxable payroll 2 -2.72
Cost/Savings Addressing the Retirement Income Crisis as percent of taxable payroll Cost/Savings Addressing the Retirement Income Crisis as percent of taxable payroll Cost/Savings Addressing the Retirement Income Crisis as percent of taxable payroll
10 benefit increase up to a maximum of 150 a month for current future beneficiaries More accurate inflation adjustment (CPI-E) Enhance minimum benefit to 125 of poverty at full retirement age with 30 years of work 10 benefit increase up to a maximum of 150 a month for current future beneficiaries More accurate inflation adjustment (CPI-E) Enhance minimum benefit to 125 of poverty at full retirement age with 30 years of work -1.20 -.37 -.19
Strengthening Family Protections for All Generations Strengthening Family Protections for All Generations Strengthening Family Protections for All Generations
Up to 12 weeks paid family leave upon the birth/adoption, illness of family member or worker -.40 Up to 5 years of caregiver credits for parents lt6 -.25 Restore student benefits for disabled/deceased workers children -.07 New child benefit of 1,000 -.07 Exempt from Family Maximum families of disabled adult children not living at home -.01 Strengthen disabled widow(er)s benefits (eliminate age 50 7-year rules provide unreduced benefits) -.04 Up to 12 weeks paid family leave upon the birth/adoption, illness of family member or worker -.40 Up to 5 years of caregiver credits for parents lt6 -.25 Restore student benefits for disabled/deceased workers children -.07 New child benefit of 1,000 -.07 Exempt from Family Maximum families of disabled adult children not living at home -.01 Strengthen disabled widow(er)s benefits (eliminate age 50 7-year rules provide unreduced benefits) -.04 Up to 12 weeks paid family leave upon the birth/adoption, illness of family member or worker -.40 Up to 5 years of caregiver credits for parents lt6 -.25 Restore student benefits for disabled/deceased workers children -.07 New child benefit of 1,000 -.07 Exempt from Family Maximum families of disabled adult children not living at home -.01 Strengthen disabled widow(er)s benefits (eliminate age 50 7-year rules provide unreduced benefits) -.04
Securing Social Securitys Financing for Generations to Come Securing Social Securitys Financing for Generations to Come Securing Social Securitys Financing for Generations to Come
Gradually eliminate the cap over 10 years, giving credit for contributions 1.95 Dedicated 10 marginal income tax rate on yearly incomes in excess of 1,000,000 1.50 Treat all salary plans the same as 401(k) plans .25 Raise employer employee payroll tax contribution rate to 7.2 over 20 years 1.41 Invest 40 of trust funds in equities, phased in over 15 years .59 Gradually eliminate the cap over 10 years, giving credit for contributions 1.95 Dedicated 10 marginal income tax rate on yearly incomes in excess of 1,000,000 1.50 Treat all salary plans the same as 401(k) plans .25 Raise employer employee payroll tax contribution rate to 7.2 over 20 years 1.41 Invest 40 of trust funds in equities, phased in over 15 years .59 Gradually eliminate the cap over 10 years, giving credit for contributions 1.95 Dedicated 10 marginal income tax rate on yearly incomes in excess of 1,000,000 1.50 Treat all salary plans the same as 401(k) plans .25 Raise employer employee payroll tax contribution rate to 7.2 over 20 years 1.41 Invest 40 of trust funds in equities, phased in over 15 years .59
Long-range surplus 0.38 0.38
1 These estimates are preliminary and do not
include the interaction effects. 2 Percent of
taxable payroll is the customary way of showing
the projected deficits/surplus and cost/savings
generated by various proposals over 75years