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A simple, unified vision t o bring us together.

A simple, unified vision t o bring us together. Retirement with dignity and security. Free from worry. . Retirement Security For All . Pitchforks Are Out… For Us!. “I’m going to get a modest benefit! Why attack me ?”. “Their pensions are too good. I don’t get that!”.

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A simple, unified vision t o bring us together.

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  1. A simple, unified vision to bring us together. Retirement with dignity and security. Free from worry. Retirement Security For All

  2. Pitchforks Are Out… For Us! “I’m going to get a modest benefit! Why attack me?” “Their pensions are too good. I don’t get that!”

  3. 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.

  4. 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.

  5. 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.

  6. blah Most Retirees Depend on Social Security for Big Percentage of Income Source: Munnell, Webb, and Golub-Sass. “The National Retirement Risk Index: An Update.” October 2012. Center for Retirement Research at Boston College

  7. Income Sources in Retirement

  8. Retirement Savings Not Broad or Deep Enough Percent of families with retirement accounts, by age of head of household. Median value of those retirement accounts, by age of head of household. 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.

  9. Fewer Traditional Pension Plans Private Retirement Plan Coverage, 1979-2010 14% Source: EBRI

  10. 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

  11. 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

  12. 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.

  13. Solution to the retirement security crisis starts with: Strengthening and expanding Social Security, followed by… An additional retirement vehicle for workers.

  14. Social Security:America’s #1 Poverty Fighter 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.

  15. 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.

  16. 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.

  17. 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.

  18. Additional Vehicle for Retirement Income:The States’ Role

  19. 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?

  20. 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)

  21. Advantages of Social Security Supplement • Can accept employer money • Longevity risk borne by plan • Portable in-state • Investment risk borne by plan • ERISA and other federal regulations don’t apply • Robust benefit • Universal • No “leakage”

  22. 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

  23. State initiatives must add up to a national demand for Congress to act.

  24. Retirement Security for All

  25. For More Information… Contact: Karen Gilgoff, Assistant DirectorAFSCME Retirees Department Dan Doonan, Labor Economist Department of Research and Collective Bargaining Services American Federation of State County and Municipal Employees, AFL-CIO1625 L Street NW Washington, DC 20036202-429-1000

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