THE RETIREMENT CRISIS AND SOCIAL SECURITY

ABSTRACT: There is a retirement crisis in America. Both current and soon-to-be retirees are more dependent on Social Security than ever, yet some politicians and corporate executives are arguing that Social Security should be cut. Senator Elizabeth Warren of Massachusetts recently gave a speech in the Senate where (in only five and a half minutes) she did an excellent job of summarizing the retirement crisis and making the case for strengthening Social Security (http://ourfuture.org/20131118/elizabeth-warren-on-social-security-its-values-not-math).

Retirees’ reliance on Social Security is only going to increase because the other two legs of the three-legged retirement security stool, pension plans and personal savings, have been weakened. With Social Security as the only strong leg of retirement security, this is not the time to be reducing its benefits.

Given that 70% of Americans indicate in polls that they oppose Social Security cuts and 65% support increasing benefits, who is pushing for these cuts? Many Republicans are ideologically opposed to social welfare programs and cuts to Social Security are in the Republican budget. President Obama and some Democrats have signed on to the idea of the cuts as a compromise in pursuit of a “Grand Bargain” to resolve the federal budget’s deficit.

Prominently promoting the cuts in Social Security benefits have been two groups of corporate executives: the Business Roundtable and Fix the Debt. There’s great irony here from two perspectives. First, the corporate executives on the Business Roundtable have retirement accounts worth $14.5 million on average. Second, if the current Social Security tax cap were eliminated, corporate executives with $10 million in income, for example, would pay $1.24 million into Social Security instead of $14,000 and Social Security’s future funding problem would disappear.

Bills have been introduced in Congress to strengthen Social Security and its benefits. I encourage you to contact your Senators and Representative to ask them where they stand on Social Security cuts and these bills.

FULL POST: There is a retirement crisis in America. Both current and soon-to-be retirees are more dependent on Social Security than ever, yet some politicians and corporate executives are arguing that Social Security should be cut. This makes no sense from a budget perspective or a retirement policy perspective. There are bills currently in Congress to strengthen Social Security, by improving both its finances and its benefits, without any impact on the federal budget or the deficit. [1]

Senator Elizabeth Warren of Massachusetts recently gave a speech in the Senate where (in only five and a half minutes) she did an excellent job of summarizing the retirement crisis and making the case for strengthening Social Security. I encourage you to listen to her speech at http://ourfuture.org/20131118/elizabeth-warren-on-social-security-its-values-not-math.

Although the average recipient gets less than $15,000 a year from Social Security, many seniors are highly dependent on it. For 36% of seniors, Social Security is 90% of their income and for two-thirds of seniors, Social Security is more than half of their income. The current poverty measure indicates that 9% of seniors live in poverty, but an updated measure that most experts consider more accurate puts that figure at almost 15%. [2] Cutting Social Security benefits would clearly increase poverty among seniors.

Retirees’ reliance on Social Security is only going to increase because the other two legs of the three-legged retirement security stool, pension plans and personal savings, have been weakened. Only 18% of private sector workers have pensions (which pay a guaranteed monthly benefit for life as Social Security does). In 1975, 50% of workers had pensions. A combination of factors including expanded foreign trade and competition, along with weakened unions (which had made pensions a standard part of workers’ benefits) contributed to this dramatic decline in pensions.

Personal retirement savings are relatively small and have been hurt by the economic collapse, which cut the value of homes (where the middle class had most of its savings) and the value of investments. Some employers have replaced pension plans with personal savings accounts such as 401ks. However, only half of workers have such accounts and 80% of those accounts have less than $67,000 in them. [3]

With Social Security as the only strong leg of the three-legged stool of retirement security, this is not the time to be reducing its benefits. Given the current state of affairs, 53% of workers are at risk for having a lower standard of living in retirement than they had while working. And this percentage is up from 38% in 2001.

Given that 70% of Americans indicate in polls that they oppose Social Security cuts and 65% support increasing benefits, [4] why is there a push to cut Social Security benefits? The only reason that seems to make any sense is that those pushing a cut are ideologically opposed to Social Security – and often to social welfare programs in general.

So specifically who is pushing for these cuts? As mentioned above, it is in the Republican budget and reflects many Republicans’ ideological opposition to social welfare programs. President Obama and some Democrats have signed on to the idea of the cuts as a compromise in pursuit of a “Grand Bargain” to resolve the federal budget’s deficit.

Prominently promoting the cuts in Social Security benefits have been two groups of corporate executives: the Business Roundtable and Fix the Debt (a project of The Committee for a Responsible Federal Budget). These groups have been spending tens of millions of dollars on campaigns to build support for cutting Social Security (and Medicare, our health insurance program for seniors). There’s great irony here from two perspectives. First, the corporate executives on the Business Roundtable have retirement accounts worth $14.5 million on average. That would generate a monthly retirement check of over $86,000 compared to the typically monthly Social Security check of $1,237. [5] Second, the current Social Security tax (Social Security’s dedicated and only funding source) is only paid on the first $113,700 of earnings. Amounts above that are untaxed. If this Social Security tax cap were eliminated, corporate executives with $10 million in income, for example, would pay $1.24 million into Social Security instead of $14,000 and Social Security’s future funding problem would disappear.

Bills have been introduced in Congress to strengthen Social Security and its benefits. The Keeping Our Social Security Promises Act has been introduced in the Senate by Senator Sanders (S.1558) and in the House by Representative DeFazio. The Strengthening Social Security Act has been introduced in the Senate by Senator Harkin (S.567) and in the House by Representative Sanchez (H.R.3118). I encourage you to contact your Senators and Representative to ask them where they stand on Social Security cuts and these bills. [6]