Darrell Berkheimer: Where are the action plans for Social Security?
Why is our current crop of presidential candidates mostly ignoring retirement issues?
I know, of course, that we face just a few other growing calamities — such as climate change, corruption, healthcare, corruption, exorbitant drug prices and abuses, corruption, deteriorating infrastructure, immigration, corruption, homelessness, housing, corruption, and divisive gridlock. And let’s not forget corruption.
But the burgeoning costs of Social Security as our population ages also must be addressed by our next presidential administration — especially since it appears the current administration isn’t going to accomplish much.
Meanwhile, California is being cited for its innovative approach for private-sector workers.
We know that Social Security is the lifeline for many older Americans, making up the bulk of their income for 61 percent of elderly beneficiaries. It’s 90 percent or more of their income for one-third who rely on the program, according to the Center on Budget and Policy Priorities, a governmental budget-policies think tank.
That think tank also reported that as of this past July the average monthly retirement benefit was slightly more than $1,400.
Can you imagine living in California with that as 90 percent or more of your income?
But many of us don’t have to imagine that situation. Because we live it.
That’s just a sampling of some the facts provided in a group of retirement stories by two writers for MarketWatch, a financial news website and subsidiary of Dow Jones & Co.
Those particular statistics are cited in a series of eight stories by Alessandra Malito, in which she compares the U.S. Social Security system with six other nations — Australia, United Kingdom, China, Japan, Brazil and Sweden. Each of those nations also are facing aging populations, which has their governments examining what changes they should make.
In the U.S., however, Malito observes that our politicians, including the 2020 presidential candidates “aren’t talking too much about solutions to this problem …”
For at least two decades now, we have been warned that the program — which also provides benefits for the disabled, impoverished and children of deceased parents — is facing insolvency unless the federal government acts.
Because it is a pay-as-you-go system, with today’s workers paying for current retiree benefits, a decline in the ratio of wage workers to retirees will reduce the trust funds that support the system. And a failure in federal action will force a 20% cut in what beneficiaries are owed by 2035, according to the trustees report earlier this year.
Solutions discussed in past decades have included raising the tax, raising the full retirement age, and raising the ceiling on the payroll tax. A little of each has been done in the past, but not enough to resolve the problem.
For years, I‘ve advocated eliminating the ceiling on the tax, rather than raising it slightly each year as a part of the benefits-cost-of-living formula used by the Social Security Administration. Other advocates also say ending the cap would eliminate the problem.
The ceiling favors wealthier workers, by not continuing to tax income above each year’s limit on their much higher earnings. It means they don’t have to pay the tax for the last several weeks or months at the end of the year. Nor does the tax apply to non-payroll income.
Another MarketWatch writer — Angela Antonelli — has shined a spotlight on the benefits of California’s new retirement plan, which took effect on July 1.
Under the plan, dubbed CalSavers, workers must be automatically enrolled in individual retirement accounts (IRAs) at a savings rate of 5% of their pay. They have the choice, however, of opting out or setting a different contribution rate — to provide up to $6,000 a year for workers under age 50 and $7,000 maximum annually for those 50 and older.
Employers with five or more workers are being required to offer either the CalSavers program or a private-sector alternate. Deadlines to begin the program vary according to number of employees, with June 30 of 2020 as the deadline for employers with 100 or more workers. Employers, however, may begin the program at any time prior to their scheduled deadline.
MarketWatch writer Antonelli reported the program will change the retirement landscape nationwide as other states pay attention to the landmark plan. Her story lists nine wide-ranging benefits provided by CalSavers.
It helps millions of Americans better prepare for retirement. (Approximately 7.4 million California workers don’t have access to an employer-sponsored retirement savings option. And more than three-quarters of low-income and one half of middle-income workers in California have no retirement assets.)
It makes small businesses competitive.
It allows employees to be more mobile.
It recognizes the value of “gig” workers. (As of Sept. 1, self-employed and gig workers are able to register directly for CalSavers.)
It benefits underserved populations, especially Latinos. (Almost half of California’s 7.4 million private-sector workers without retirement plans —3.5 million — are Latinos who will benefit from CalSavers.)
It reduces the burden on state and federal budgets. (Economically disadvantaged seniors — such as those who suffer healthcare bankruptcy— must turn to public tax-financed programs for support.)
It provides a model for other states.
It’s expected to inspire further innovation.
It creates new opportunities for the financial services industry.
A major issue regarding how successful the program will be is the choice of opting out of the program, which is understandable when workers are barely meeting expenses for shelter and food. Any unexpected auto repair bill or healthcare expense could prompt them to drop out or reduce participation to a bare minimum.
But nationally, the presidential candidates should be putting themselves on record with what actions they would initiate to bolster the Social Security program and retirement options.
Darrell Berkheimer, who lives in Grass Valley, is a frequent contributor to The Union. He is the author of six books available through Amazon. His latest, “Essays from The Golden Throne”, also is available at Book Seller in Grass Valley. It includes many articles previously published by The Union. Contact him at email@example.com.
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