A simple, unified vision to bring us together.
Retirement with dignity and security.
Free from worry.
Retirement Security For All
Pitchforks Are Out… For Us!
“Their pensions are
too good.
I don’t get that!”
“I’m going to get
a modest benefit!
Why attack me?”
How do we realize our vision?
• Make sure all Americans can retire free from worry.
• Build broad political support for secure and
adequate solutions to the retirement income crisis
in America.
• Raise expectations and create a demand for the
right to retirement security.
• Build activity at the state level to achieve national
solutions.
A New Coalition for Change
• Led by AFSCME and SEIU.
• More than 40 additional organizations.
• Concerned that millions of U.S. workers will
lack the financial means to retire.
• Fighting constant attacks on Social Security
and Medicare.
• Seeing trends against traditional pensions in
both private and public sectors.
Most people don’t have what they need to retire
and it’s only getting worse.
Share of households
at risk of not being
able to maintain
living standards in
retirement.
blah on Social Security
Most Retirees Depend
for Big Percentage of Income
100%
90%
80%
70%
60%
Top 25% of Income
Middle 50% of Income
Bottom 25% of Income
50%
40%
30%
20%
10%
0%
Percent of Retiree Income from Social Security
Source: Munnell, Webb, and Golub-Sass. “The National Retirement Risk Index: An Update.” October 2012. Center for Retirement Research at Boston College
Income Sources in Retirement
Retirement Savings Not Broad or Deep Enough
Percent of families with retirement
accounts, by age of head of household.
62%
Median value of those retirement accounts,
by age of head of household.
$120,000
60%
$100,000
58%
56%
54%
35-44
45-54
55-64
$80,000
$60,000
52%
$40,000
50%
$20,000
48%
$0
35-44
45-54
55-64
Source: Bricker, et. al.
Federal Reserve Board o
Governors, 2010 SCF
When all households are included, the median retirement account balance is
$3,000 for all working-age households and $12,000 for near-retirement households.
Fewer Traditional Pension Plans
Private Retirement Plan Coverage, 1979-2010
60%
45%
50%
40%
31%
30%
20%
14%
DB
10%
DC Only
0%
1979
1984
1989
1994
1999
2004
2009
Any Plan
Source: EBRI
Finally Recognizing Looming
401(k) Disaster
“Seventy-five percent of Americans nearing retirement
age in 2010 had less than $30,000 in their retirement
accounts.”
-- “Our Ridiculous Approach to Retirement,” NYT
Finally Recognizing Looming
401(k) Disaster
“A 2008 Annual Survey of 401(k) Plan Sponsors by
Deloitte Consulting found that 80% of employers believe
that 401(k)s are effective in recruiting employees to
come work for them but only 13% believe that the
401(k) plans they offer will provide retirement security
for their workers.”
-- Secrets of the 401(k) Industry
401(k)s: What’s “My Number”
Even if you’ve saved properly, 401(k)s
require workers to determine:
•
•
•
•
What investment returns they’ll get in retirement
How long they will live
How much to withdraw each year
What inflation will be like in retirement
 An Impossible Task: The best actuaries, economists and
investors can’t project these in the short run.
Solution to the retirement
security crisis starts with:
1.
Strengthening and expanding Social
Security, followed by…
2.
An additional retirement vehicle for
workers.
Social Security:
America’s #1 Poverty Fighter
Poverty Rates With and Without Social Security
Women
Men
Age
With Social Security
Without Social
Security
With Social Security
Without Social
Security
62-64
9.9%
24.2%
8.9%
18.9%
65-74
9.8%
43.1%
6.2%
34.9%
75+
11.6%
57.6%
7.1%
48.1%
Source: Authors’ calculations based on 2000 and 2010 Current Population Survey Annual Social and Economic (ASEC) Supplement Survey (King, et al.
2010). Earnings and income data are for calendar years 1999 and 2009. Chart, courtesy of the Institute for Women’s Policy Research.
14
Social Security:
Improve Benefits Now!
• Great success – benefits paid monthly for over 70 yrs.
• More than ½ of retirement income for 70% in U.S.
• Modest benefits: Average $15,000 a year for a worker.
• Why not build on success by improving benefits and
ensuring long-range solvency for the Trust Funds?
• Many in Congress agree.
New Bills in 113th Congress
These new bills enhance benefits and Social Security’s long-range finances:
• Strengthening Social Security Act (S.567/H.R.3118): Harkin/Sanchez bill
• Boost benefits by $70 a month
• Change COLA formula to reflect seniors’ costs (e.g., health care)
• “Scrap the cap” on wages.
• Protecting and Preserving Social Security Act (S.308/H.R.649): Begich/Deutch
• Switch the COLA formula to the fairer CPI-E
• Gradually raise cap on payroll contributions.
• Keeping Our Social Security Promises Act (S.500)/No Loopholes in Social
Security Taxes Act (H.R. 1029): Sanders/DeFazio
• Raise the wage cap from $117,000 to $250,000
• Gradually increase cap until all earnings are covered.
cont.: New Bills in 113th Congress
• Social Security Enhancement and Protection Act (H.R.1374): Moore
• Provide 5 years of work credits for family caregivers
• Boost benefits by 5 percent for the very old
• Restore survivor benefits for college students
• Scrap the wage cap
• Gradually increase payroll contributions.
• Retirement and Income Security Enhancements (RAISE) Act (S.2455): Begich/
Murray
• Enhance benefits for divorced spouses and widows
• Extend benefits for survivor children to age 23
• Raise the wage cap.
The discussion is just beginning.
As Boomers retire, political support will grow.
Additional Vehicle for
Retirement Income:
The States’ Role
Key Policy Issues: Design Decisions
DB/DC Fights Inform Us!
DB Plans get:




More Bang-for-the-Buck
Life Annuity
Pool investment risk
Pool mortality risk
401k/DC plans fall short:
 Poor investment returns/high fees
 Early Withdraws/leakage problems (~3%/yr)
 Are a failed experiment: $6.6 trillion deficit
Question: Who Should be Covered?
A Role for the States:
Supplemental Social Security
Combine features of Social Security &
traditional pensions.
Target benefits to equal half of initial Social
Security benefits for most workers.
– Benefit formula: .75 percent X years of service X
Average Indexed Monthly Earnings
– Approximately $8000 annual benefit today
– Full Retirement at 65
Target cost: 4% of payroll (add’l features add to cost)
Advantages of Social Security
Supplement
 Can accept employer
money
 ERISA and other federal
regulations don’t apply
 Longevity risk borne by
plan
 Robust benefit
 Portable in-state
 Universal
 Investment risk borne by
plan
 No “leakage”
The Road to Retirement Security:
State Actions, to date…
Legislature passed plan: CA, MA
Legislature passed study: CT, OR, MN, VT
Exec. Order/Task Force: MDf of initial Social
State initiatives must
add up to
a national demand
for Congress to act.
Retirement Security for All
For More Information…
Contact:
Karen Gilgoff, Assistant Director
AFSCME Retirees Department
Dan Doonan, Labor Economist
Department of Research and
Collective Bargaining Services
American Federation of State County and
Municipal Employees, AFL-CIO
1625 L Street NW
Washington, DC 20036
202-429-1000