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From the category archives: Retirement

Trump’s Debt Idea = Social Security Default

 

The latest idea from Donald Trump, the GOP Presidential candidate and self-proclaimed “king of debt,” would have devastating effects on the Social Security Trust Fund. While we could write pages on the Treasury bond market, federal debt and the Social Security Trust fund, chances are you wouldn’t want to read it, so instead, here is a quick summary of the issue.  

Starting first with The Donald’s plan to run the U.S. government like one of his failing casinos.  He described it on CNN:

“If we can buy back government debt at a discount -- in other words, if interest rates go up and we can buy bonds back at a discount -- if we are liquid enough as a country we should do that. ... People said I want to go and buy debt, and default on debt. These people are crazy. This is the United States government. First of all, you never have to default because you print the money, I hate to tell you, OK? So there's never a default. ... I'm the king of debt. I understand debt better than probably anybody. I know how to deal with debt very well. I love debt. But, you know, debt is tricky, and it's dangerous; you have to be careful, and you have to know what you're doing.”

Both the Motley Fool and The Economist have raised red flags on what this strategy would actually mean for the Social Security Trust Fund -- which has $2.79 trillion invested in Treasury notes that Trump is apparently willing to devalue.

“Debt issued by the U.S. government is done so with the ‘full faith and credit’ of the United States. To consider allowing U.S. debt to get into a situation that incites a crash in bond prices would probably undermine the high quality ratings bestowed on U.S. debt and raise major red flags in the U.S. stock market and in markets around the world that look to the U.S. as a rock-solid financial leader.

The single largest holder of U.S. debt is the Social Security Trust, which held 16% of outstanding national debt at the end of Q1 2013. Other federal programs holding U.S. debt include the Medicare Hospital Insurance Trust, military retirement fund, and federal civil-service retirement and disability fund. If Trump were to consider buying back debt at a discount it would potentially reduce the investment value of the Social Security Trust, which generally invests its cash reserves in extremely safe, interest-bearing U.S. Treasury notes. Doing so could wind up hurting current and future retirees who depend on this key federal program."

The Economist reminds us this approach is what got Greece into so much fiscal hot water:

“The idea, it seems, would be to get creditors {editor’s note: in the case of the Social Security Trust Fund that’s seniors, the disabled and survivors} to accept less than 100 cents on the dollar. This happens with corporate bankruptcies; if the market price has fallen to 60 cents on the dollar, and been snapped up by specialist hedge funds, then redeeming the debt at 70 cents on the dollar may be a good deal. Emerging economies have done the same in the past when they have fallen on hard times; it happened in Greece.

But with Treasury bonds, investors expect to get 100 cents on the dollar. It is the risk-free asset that underpins the entire global financial system. A forced deal, of course, would count as a default. Treasury bonds are at the heart of the financial system. Banks use them as collateral for loans; insurance companies hold them as reserves; pension funds own then to fund retirement benefits; mutual funds own them as well. Any default within the system would have cataclysmic consequences for the economy that would far outweigh any gains in refinancing costs. To cap it all, the Federal Reserve owns almost $2.5 trillion of Treasury bonds and the Social Security Fund some $2.8 trillion. So the government would, in part, be defaulting to itself.

In short, this seems like a completely nonsensical idea. Do you think it is possible that Mr Trump didn't think it through and just said the first words that came into his head? Couldn't be.”

The takeaway from all of this is that Donald Trump’s claims that he’ll “leave Social Security alone” is an empty promise because, if his debt plan becomes reality, the Social Security Trust will lose years of solvency and the billions of dollars contributed to the Trust Fund by American workers will actually be worth only pennies on the dollar.  

Celebrating Older Americans Month

Chances are if you, or anyone in your family, is 65 or older your life has been impacted by an Older Americans Act program.  From Meals on Wheels to senior centers, prevention of physical and financial abuse, computer training to legal assistance, OAA programs touch the lives of millions of seniors and their families.  This myriad of programs provides home and community-based services making it possible for older adults to remain independent, but they’ve continually faced flat or shrinking budgets at a time of growing needs.  Funding programs that allow seniors to age in place is cost-effective; however, the Older Americans Act languished for more than 5 years without Congressional reauthorization. 

Thankfully, this year is different.  Today we are celebrating Older Americans Month with a newly reauthorized OAA, signed by President Obama just a few weeks ago:

“The President believes in the Older Americans Act because it funds services that are central to older adults’ health and lasting independence, such as meals, job training, transportation, and health promotion.  And for those who do need consistent care, the law provides nursing home protections and enhances the Long-Term Care Ombudsman programs.”  Valerie Jarrett, Senior Advisor and Assistant to the President

The celebration continues as The Leadership Council of Aging Organizations (@LCAgingOrgs), chaired by the National Committee, will host a Twitter chat on May 24 @ 1-2 p.m. ET to celebrate Older Americans Month—and call for funding investments in Older Americans Act programs. You’re invited to join the chat using #WeAreOAA.

Join at www.twitter.com/#WeAreOAA or at http://twubs.com/WeAreOAA

The Retirement Challenge Threatening Our Mothers

Money posed an interesting question today in advance of Mother’s Day weekend...

 What's better than flowers for mom?  A fatter 401(k).

While you’re not likely to go out and set up a 401K for mom today you should be aware of the inherent and serious challenges our mothers are facing in retirement.  NCPSSM’s President/CEO, Max Richtman, describes it this way:

“Women earn less than men even when doing the same jobs, they more often work part-time or in jobs that do not offer retirement savings plans, and they tend to spend more time out of the workforce as a consequence of their caregiving responsibilities. Women could lose $430,480 in earnings over the course of a 40-year career due to the wage gap alone.  For Latinas the career losses mount to $1,007,080, and for African American women the losses are $877,480. Lower career earnings also translate to fewer savings for many women in retirement. At the same time, their longer lifespan and higher chances of disability means that they will have higher retirement costs, both for everyday expenses and necessary medical care.” 

Is it any surprise that the thought of running out of money in retirement keeps 57% of women awake at night?  Finding ways to eliminate this retirement inequity is at the heart of our Eleanor’s Hope initiative. Named in honor of First Lady Eleanor Roosevelt, this campaign raises awareness, recruits and trains new activists and bolsters Congressional leaders who are making a difference on women’s health and retirement security issues.  We are also advocating for legislation that addresses the inequities threatening millions of retired women and working to elect lawmakers who share our vision of retirement equity for women. 

There are a number of proposals which, if adopted, could significantly level the playing field for women and reduce the threat of poverty in their old age: 

Gender Pay Equity. Eliminating the wage gap that limits women’s earnings is essential to helping our daughters and granddaughters save for their own retirement. Congress should strengthen and reform the “Equal Pay Act” by putting an end to pay secrecy, strengthening workers’ ability to challenge discrimination and bringing equal pay law into line with other civil rights laws.  

Caregiver Credit. Compute the Social Security benefit by giving an annual caregiver credit for each year of caregiving so that total earnings for the year would equal 50 percent of that year’s average annual wage. Caregiving service years would be those in which an individual provides care to children under the age of six or to elderly or disabled family members. Up to five family service years could be granted to any worker.

Improve Survivor Benefits. Increase the benefit paid to a surviving spouse to an amount that is equal to 75 percent of the total combined benefits that were paid to the couple prior to the spouse’s death, capped at the benefit level of a lifelong average earner.

Consumer Price Index for the Elderly. Adopt the Consumer Price Index for The Elderly (CPI-E) for the purpose of determining the amount of the cost-of living adjustment (COLA) adjustment for Social Security benefits. This is especially important for women who tend to receive benefits longer because they live longer.

By all means, please go ahead and buy those flowers for mom this weekend.  Also consider getting involved with our Eleanor’s Hope campaign to ensure generations of American mothers can enjoy a retirement free of worry and poverty. 

 

The Cruz/Fiorina Plan for Social Security and Medicare

Here’s a “Throwback Thursday” reminder of what a Cruz/Fiorina administration would mean for millions of Americans and their families who depend on Social Security and Medicare.

...at least what they’ll admit to today, anyway.  


Unequal Pay’s Lasting Legacy: Lost Income from Your 1st day at Work until the Day You Die

Max Richtman, NCPSSM President/CEOMax Richtman, NCPSSM President/CEO

It’s certainly not news that American women continue to earn less than men for the same work, typically 79 cents on the dollar.  But what’s less understood is the devastating impact those lost wages have over time.  In fact, over a working woman’s career, that pay gap could accumulate to a half million dollars in lost income and even more for women of color.  A comprehensive analysis of gender pay inequality, released by the Joint Economic Committee’s Democratic staff, shows how the gender pay gap grows over time.  It’s not just an issue for working women because this inequality can also have a compounding and devastating impact on retired women.

The thought of running out of money in retirement keeps 57% of women awake at night. That’s not a surprise when you consider the many combined factors which make retirement especially challenging for American women. Women earn less than men even when doing the same jobs, they more often work part-time or in jobs that do not offer retirement savings plans, and they tend to spend more time out of the workforce as a consequence of their caregiving responsibilities. Women could lose $430,480 in earnings over the course of a 40-year career due to the wage gap alone.  For Latinas the career losses mount to $1,007,080, and for African American women the losses are $877,480. Lower career earnings also translate to fewer savings for many women in retirement. At the same time, their longer lifespan and higher chances of disability means that they will have higher retirement costs, both for everyday expenses and necessary medical care.

These financial obstacles facing older women explain why women are 80% more likely than men to be impoverished at age 65 and over. The median income of women age 65 and older is 44% lower than the median income of men of the same age and that poverty gap widens over time due to decreasing income for women at older ages. Women aged 75 to 79 are three times as likely and those over the age of 80 are twice as likely to live in poverty compared to men. While it’s self-evident that working women must be aware of the unique challenges they could face in retirement, simply understanding these issues won’t be enough to bridge the very real gap created by systemic and demographic forces far beyond their control.  That’s why the National Committee to Preserve Social Security and Medicare launched our Eleanor’s Hope initiative.  We’re not only educating but also advocating for legislation that addresses the inequities threatening millions of retired women while also working to elect lawmakers who share our vision of retirement equity for women. 

There are a number of proposals which, if adopted, could significantly level the playing field for women and reduce the threat of poverty in their old age: 

Gender Pay Equity. Eliminating the wage gap that limits women’s earnings is essential to helping our daughters and granddaughters save for their own retirement. Congress should strengthen and reform the “Equal Pay Act” by putting an end to pay secrecy, strengthening workers’ ability to challenge discrimination and bringing equal pay law into line with other civil rights laws.  

Caregiver Credit. Compute the Social Security benefit by giving an annual caregiver credit for each year of caregiving so that total earnings for the year would equal 50 percent of that year’s average annual wage. Caregiving service years would be those in which an individual provides care to children under the age of six or to elderly or disabled family members. Up to five family service years could be granted to any worker.

Improve Survivor Benefits. Increase the benefit paid to a surviving spouse to an amount that is equal to 75 percent of the total combined benefits that were paid to the couple prior to the spouse’s death, capped at the benefit level of a lifelong average earner.

Consumer Price Index for the Elderly. Adopt the Consumer Price Index for The Elderly (CPI-E) for the purpose of determining the amount of the cost-of living adjustment (COLA) adjustment for Social Security benefits. This is especially important for women who tend to receive benefits longer because they live longer.

It’s been more than 50 years since our nation acknowledged and attempted to address, with passage of the Equal Pay Act, the gender wage gap which unfairly targets half of our population with billions in lost wages.   Yet, at the current rate of change, it will take another 40 years to close that gap.   That’s simply not an option for generations of American women who will continue to face the consequences of income inequality from their very first day on the job until they die.  

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