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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 America
New Orleans
Saturday, November 23, 2013
Eric Kingson
Professor of Social Work
Syracuse University School of Social Work
erkingso@syr.edu
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
Evidence of shift?
Until now, framed almost exclusively as “every knows…”
Choice: How much to cut?
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Strong, growing opposition to benefit cuts
– Labor, Netroots, Aging, Women’s, Veterans, other
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Chained-CPI
– Subtle change in way press explains Chained-CPI
– May be becoming “toxic” (e.g., Steve Forbes)
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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)
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
“America’s overall retirement system is in big trouble. There’s just one
part of that system that’s working well: Social Security. And this suggests
that we should make that program stronger, not weaker… Realistically,
Social Security expansion won’t happen anytime soon. But it’s an idea that
deserves to be on the table — and it’s 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)
Why this happening now
Favorable organizational and political changes
Real Retirement Income Crisis
Why this is happening now
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Labor’s all in
Electronic advocacy groups
Traditional advocacy groups
Creating a “Buzz” about Expanding Benefits
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Organizations put forth proposals
Social Security Modernization Commission
Women’s & 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
Indicators of Retirement Income Crisis
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2/3rds unable to maintain standard of living in retirement (NRRI)
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$6.6 trillion retirement income gap, ages 32-64 (Pension Rights Center)
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Declines in household wealth from $66 trillion in 2007 to $58
trillion in 2011
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Median income of households “headed” by person 55-64 dropped
from $61,700 in 2009 to $58,626 in 2012
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“38.3 million working-age households (45%) do not have any
retirement account assets” (NIRS)
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“Four out of five working households have retirement savings less
than one times their annual income” (NIRS)
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54% of 45-54 report being “totally unprepared for retirement”
(2011 Alliance Life Insurance Survey)
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Declining confidence in ability to afford retirement
Surveys show very low confidence in ability to afford comfortable retirement
Causes of Retirement Income Crisis
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Failure of 401 (k) system & Loss of defined benefit plans
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Social Security Benefit cuts resulting in declining Social
Security Replacement Rates (even lower when Medicare
Premiums counted)
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Loss of home equity
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Stagnant wages
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Health care costs
Retirement Plan Participation trends show a shift from
defined-benefit pensions to defined-contribution plans
Source: “Chart of the Day: Our Vanishing Home Equity,” Business Insider , May 15, 2009
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
Source: Social Security Administration, Income of the Aged Chartbook, 2010
http://www.ssa.gov/policy/docs/chartbooks/income_aged/2010/iac10.pdf
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
Four Points
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Social Security as solution
Financing is a means, not an end
Nation can afford to strengthen
Values matter
Social Security Works All Generations
Plan
• Addresses Nation’s Retirement Income Crisis
• Strengthens Family Protections
• Secures Social Security’s Financing
Social Security Works All Generations Plan 1
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
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
Up to 12 weeks paid family leave upon the birth/adoption, illness of family member or worker
Up to 5 years of caregiver credits for parents <6
Restore student benefits for disabled/deceased workers’ children
New child benefit of $1,000
Exempt from Family Maximum families of disabled adult children not living at home
Strengthen disabled widow(er)s benefits (eliminate age 50 & 7-year rules; provide unreduced benefits)
-.40
-.25
-.07
-.07
-.01
-.04
Securing Social Security’s Financing for Generations to Come
Gradually eliminate “the cap” over 10 years, giving credit for contributions
Dedicated 10% marginal income tax rate on yearly incomes in excess of $1,000,000
Treat all salary plans the same as 401(k) plans
Raise employer & employee payroll tax contribution rate to 7.2% over 20 years
Invest 40% of trust funds in equities, phased in over 15 years
Long-range surplus
1
2
These estimates are preliminary and do not include the interaction effects.
“Percent of taxable payroll” is the customary way of showing the projected deficits/surplus and cost/savings generated by various proposals over 75years
+1.95
+1.50
+.25
+1.41
+.59
+0.38