Sunday, February 17, 2013
Robbing from the poor to give to the rich (And yet they have the nerve to call SS an "entitlement")
What an excellent time to cut Social Security:
Problems for future retirees seem to be closing in from all sides. Half of American workers have no retirement plans through their jobs, leaving people on their own to save for old age.
Meanwhile, four out of five private-sector workers with retirement plans at work have only 401(k)-type defined contribution accounts, rather than traditional pensions that pay retirees a fixed benefit for life. Numerous studies have found that workers with defined-contribution accounts often put aside too little money, make too many withdrawals or employ the wrong investment strategies to save enough for old age. Overall, people ages 55 to 64 have a median retirement account balance of $120,000, Boston College researchers have found, which is enough to fund an annuity paying about $575 a month, far short of what they will need...
This is happening at the same time that myopic political leaders are insisting that we must cut benefits -- although the "good guys" insist we'll "tweak" it to protect the poorest of the poor -- not caring that their cuts will create many more very poor seniors.
The average monthly SS security check is $1230.00. The median income for SS recipients is $20,000 a year. Social Security provides at least half of total household income for 65% of seniors. To talk about cutting it, as if it's just a little nothing that no one will really feel shows, once again, just how distant our wealthy political class is from the average citizen. After all, they all have fat 401ks that have recovered nicely from that unfortunate little incident in 2007:
The retirement savings shortfall is revealing an economic divide separating those who are well prepared for retirement from those who are not. Recent policy changes aimed at bolstering Americans’ retirement prospects have only contributed to the growing inequality.
That's if they are able to save anything at all. If they still have a house. Or a job. The economy of the last four years has been very brutal on a whole lot of people who don't have the time to start over:
The government grants at least $80 billion a year in tax breaks to encourage retirement savings in 401(k)-type accounts. But the biggest benefits go to upper-income people who can afford to put aside the most for retirement, allowing them to reap the biggest tax breaks.
Someone making $200,000 a year and contributing 15 percent of pay to a retirement account would receive about a $7,000 subsidy from the federal government in the form of a tax break, whereas workers earning $20,000 making the same 15 percent contribution would get nothing because they don’t earn enough to qualify for a deduction. Someone making $50,000 and making the 15 percent contribution would receive only about a $2,100 tax deduction.
The Great Recession and the weak recovery darkened the retirement picture for significant numbers of Americans. And the full extent of the damage is only now being grasped by experts and policymakers.
There was already mounting concern for the long-term security of the country’s rapidly graying population. Then the downturn destroyed 40 percent of Americans’ personal wealth, while creating a long period of high unemployment and an environment in which savings accounts pay almost no interest. Although the surging stock market is approaching record highs, most of these gains are flowing to well-off Americans who already are in relatively good shape for retirement.
Liberal and conservative economists worry that the decline in retirement prospects marks a historic shift in a country that previously has fostered generations of improvement in the lives of the elderly. It is likely to have far-reaching implications, as an increasing number of retirees may be forced to double up with younger relatives or turn to social-service programs for support.
“This is the first time that Americans are going to be relatively worse off than their parents or grandparents in old age,” said Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at the New School for Social Research.
They'll work longer. After all, the retirement age is now 67 for most of us already. And I assume many will work longer than that because they have no choice. (I'm not sure why everyone thinks that's such a great idea --- young people need the jobs that seniors will be clinging to longer than they logically should.) And the result will still be that there will be more poor old people than there were when we were kids.
I don't want to hear anyone saying that taking care of the elderly in relative comfort and dignity is unaffordable. This is an extremely wealthy country that can apparently afford luxuries like an ossified military empire and many thousands of multi-millionaires who use our clever "private sector" retirement plans as a loophole to shield hundreds of millions of dollars in assets from taxation (and then run for president!). We are talking about priorities here. And the ruling elites have decided that keeping the elderly from penury is not at the top of the list.
Sadly, there's not much we can do but fight to hold on to what little we have:
Even many of the diminishing share of workers who are enrolled in traditional pension programs face uncertainty as an increasing number of plans are underfunded, causing employers to freeze benefits.
Could there be a worse time to cut the already meager benefits that Social Security provides? Only a disaster capitalist would think otherwise.
The hits to retirement income come as many Americans are living longer and health-care costs continue to grow, meaning they need to salt away more money for retirement.
Workers have limited options for closing the gap. More are going to have to work longer. After many decades of decline, average retirement ages have already been creeping up in the past 20 years.
A recent survey by the Conference Board found that nearly two-thirds of Americans ages 45 to 60 say they plan to delay retirement. Two years earlier, 42 percent said they would work longer.
Some lawmakers and other advocates say the best way to cope with the growing gap would be to further expand Social Security and Medicare benefits, or to add another layer of taxpayer-subsidized savings that workers could use only for retirement.
“We need to do more to help American families cope with this looming retirement crisis,” Sen. Tom Harkin (D-Iowa), chairman of the Committee on Health, Education, Labor and Pensions, said at a hearing late last month. “Hardworking Americans deserve to be able to rest, take a vacation and spend more time with their grandkids when they get older.”
But many policymakers are pushing to rein in the nation’s debt by trimming Medicare, Medicaid and Social Security benefits. Those programs are the primary drivers of the long-term deficit but are also financial mainstays for the vast majority of the nation’s retirees.
Both Medicare and Social Security already are on course to provide reduced benefits for future retirees — reductions that will grow deeper if lawmakers follow through on new proposals to further trim the programs.
With the Social Security retirement age moving to 67 under a federal law passed in 1983, people who leave the workforce earlier — and the vast majority do — will see smaller payouts.
Health-care costs continue to outpace inflation, meaning more out-of-pocket expenses for future seniors. Retirees are also slated to pay more for their health care with Medicare premiums, which are deducted from the Social Security checks of senior citizens, set to rise from 12.2 percent to 14.9 percent by 2030.
When I see articles saying that while it's true that cutting Social Security won't affect the deficit or fix the global problem of health care costs, it still must be done in order to instill "confidence" or because it's politically clever to appease the deficit hawks by offering up cuts that don't kick in right away (and are therefore safe for those who are in office today) I want to scream. That cynical opportunism seems to be at the heart of the whole conversation, from Pete Peterson's crusade to Barack Obama's ludicrous belief that it's possible to take these political disagreements off the table for good if he can just make the right "deal."
Everybody's got a good reason for doing it but at the end of the day the only thing that really makes sense is that elites have created a bunch of rationales for their belief that it's just too expensive to have a large number of elderly in the population. After all, there are heirs to provide for.
The money is there. This argument is all about how we decide to allocate it and where it's going to be allocated. Right now, this is how we do it:
That's a choice, not an act of God.
digby 2/17/2013 10:46:00 AM