Category Archives for Retirement

GAO Report Reveals Social Security Benefits Gap between Rich, Poor

Published in Woonsocket Call on May 1, 2016

We intuitively know that there is a growing income gap between America’s rich and poor. We heard it for months during the presidential democratic debates. But a newly released GAO report documents this charge, the disparities and their impact on Social Security Benefits.

Growing disparities in life expectancy between America’s rich and poor is eroding the progressive nature of Social Security. A new Government Accountability Office (GAO) report, “Shorter Life Expectancy Reduces Projected Lifetime Benefits for Lower Income,” requested by Senator Bernie Sanders, shows that low-income American men (making about $20,000 a year) will lose 11 percent to 14 percent of their lifetime Social Security benefits while high-income men (making $80,000 annually) will see a 16 percent to 18 percent benefit boost due to this growing gap.

Life Expectancy Impacts SSA Benefits

The GAO study, released on April 4, 2016, found that raising the Social Security retirement age would result in even fewer benefits for lower-income groups. Lower-income men are living between 4 and 13 fewer years than higher-income men, and lower-income women are living between 2 and 14 fewer years than higher-income women.

“Poverty should not be a death sentence,” said Sanders, who serves as ranking member on the Primary Health and Retirement Security Subcommittee. “When over half of older workers have no retirement savings, we need to expand, not cut, Social Security so that every American can retire with the benefits they’ve earned and the dignity they deserve,” he says.

According to 64 page GAO report, the wealthiest Americans are not only living longer and collecting more in Social Security benefits, they are also contributing less of their income toward Social Security. Almost all of the income gains over the past three decades have gone to those earning above the $118,500 earnings cap and have therefore been exempt from Social Security taxes, costing the Social Security Trust Fund over $1.1 trillion, says the report.

“Today, the wealthiest Americans contribute less to Social Security than at any other time in recent history. We must reject calls to raise the retirement age and instead strengthen Social Security by ensuring millionaires and billionaires pay their fair share,” Sanders said.

Max Richtman, President and CEO of the National Committee to Preserve Social Security and Medicare (NCPSSM), says that the GAO report is especially important when you consider the push in Congress to raise Social Security’s retirement age to reduce benefits. “Forcing average Americans to delay retirement until 70, as suggested by some in Washington, would mean even smaller benefits for lower-income groups,” he says.

Richtman notes that NCPSSM has long opposed increasing the Social Security retirement age, stating that it is “nothing but a cruel cut in benefits” The GAO report shows exactly how cruel it would be, he says.

Instead of cutting Social Security, Richtman calls on Congress to boost benefits so that retirement income program can continue to fulfill its promise providing an adequate base of income for America’s seniors.

Lawmakers Push to Protect Social Security

Sanders, a presidential Democratic candidate, has introduced legislation that would ensure that Social Security would be able to pay every benefit owed to every eligible American for the next 58 years. His plan would increase benefits by more than $1,300 a year for seniors with less than $16,000 in annual income. This includes boosting yearly cost-of-living adjustments by making the consumer price index better reflect seniors’ rising costs for health care and prescription medicine.

To shore up the retirement program’s trust fund, the Senator would lift the cap on taxable income so everyone who makes more than $250,000 a year would pay the same percentage of their income into Social Security as middle-class working families.

“This report reinforces the importance of strengthening Social Security and preserving the guarantee of Medicare, especially for working and middle class Rhode Islanders,” said Congressman Cicilline (D-RI), who is a co-sponsor of the Protecting and Preserving Social Security Act. “After a lifetime of hard work, Rhode Islanders should be able to retire with economic security and peace of mind, he says, pledging to continue his efforts to support “commonsense” legislation that strengthen Social Security benefits.

The GAO study is a warning that proposals to raise the retirement age “would fall hardest on those who can least afford it,” says Senator Sheldon Whitehouse (D-RI). As a founding member of the Defending Social Security Caucus, Whitehouse plans to explore ways to strengthen the Social Security, “the bedrock of American retirement security.”

GAO made no recommendations in this report. However, in comments the Social Security Administration (SSA) agreed with GAO’s finding that it is important to understand how the life expectancy in different income groups may affect retirement income. The federal agency sees financial literacy as a key factor in preparing for a “secured retirement.”

According to a SSA official, “Social Security offers one of the best tools for the public to plan for their retirement and educate themselves about their benefits – a my Social Security account which is a secure, personalized online account that can be created at http://www.socialsecurity.gov/myaccount. With a my Social Security account, people can check their Social Security Statement to learn about future Social Security benefits, verify annual earnings, and plan for their financial future. More than 23 million people have already created secure, convenient accounts,” he says.

In recent years Congress has looked for ways to keep the Social Security program afloat by adjusting Social Security tax contributions, increasing retirement age, and reducing benefit amounts. Now with the release of the new report findings, the message is clear. Congress must not tinker with Social Security until it understands the unanticipated impact on those receiving the benefit checks, especially on the lower-income retirees.

For more information, contact Charles Jeszeck at (202) 512-7215 or jeszeckc@gao.gov.

Social Security Gets Attention at Debate

GOP Candidates Share Their Plans for Shoring Up System’s Solvency

Published in Woonsocket Call on March 12, 2016

Last Thursday, the four surviving G0P contenders for president at the CNN Republican debate at the Bank United Center on the campus of the University of Miami, focused on meaty policy issues and not theatrics. Previous debates were heated and sparks flew between candidates. But many political wonks consider this one to be subdued, may be even a little boring. Like the other 11 debates, on March 10 Ohio Governor John Kasich, Senator Ted Cruz of Texas, Businessman Donald Trump and Senator Marco Rubio of Florida, gave their two cents on scores of policy issues including, the right to bear arms, trade, jobs, illegal immigrants, education, national security, fighting ISIS, Iran’s nuclear deal and protecting Israel. But one political hot potato issue, Social Security, even got a little more air time during this debate.

With Florida having the highest percentage of retirees in the country, with nearly 3.1 million residents receiving a Social Security check, CNN Chief Political Correspondent Dana Bash, brought Social Security into the debate by asking the candidates how they would keep the nation’s retirement program afloat for future generations.

Bash called on Rubio to explain his position on rising the retirement age and reducing benefits for wealthy retirees. The Florida Senator said he would not cut Social Security checks, joking that “I’m against any changes to Social Security that are bad for my mother, a Social Security recipient.”

Younger Generations Take Brunt of GOP Fix for Social Security

Rubio warned that Social Security will ultimately go bankrupt taking the country down with it. So, here’s his fix. “So what it will require is people younger, like myself, people that are 30 years away from retirement, to accept that our Social Security is going to work differently than it did for my parents,” he noted.

The 44- year-old Florida Senator, called for increasing the retirement age of younger persons to age 68 ultimately to age 70, suggesting that Social Security checks should not “grow as fast as someone who made less money.”

“Medicare could very well become the option of using my Medicare benefit to buy a private plan that I like better. Medicare Advantage does that now,” said Rubio.
Explaining what he favors making changes to Social Security, Rubio noted that “in less than five years, only 17 percent of our budget will remain discretionary; 83 percent of the federal budget in less than five years will all be spent on Medicare, Medicaid, the interest on the debt.”

CNN moderator Bash called on Trump to explain why he did not want to raise the Social Security retirement age and his rationale for not wanting to cut benefits to wealthy retirees.

Trump responded by saying that his democratic opponents oppose cutting the retirement program, evening wanting to give recipients “even more.” The businessman, becoming more of a politician, clearly sees how the heated political issue, of making changes to Social Security, will bring votes to the Democrats. ”And that’s what we’re up against. And whether we like it or not, that is what we’re up against,” he says.

“I will do everything within my power not to touch Social Security [either making benefit cuts or rising the eligibility age”. Trump believes the solution is “to make this country rich again; to bring back our jobs; to get rid of deficits; to get rid of waste, fraud and abuse, which is rampant in this country.” He notes that catching improper retirement payments will also increase the solvency of the program.

Time Can Allow a Fix for Social Security Program

In response to those warning about the impending bankruptcy of the Social Security program if changes are not made, Trump says he would have a “a long-time to go,” possibly over 20 years, to increase the solvency of the program. It seems that he does believes that time will be on his side to fix Social Security, if he becomes president.

“The numbers don’t add up,” charges Rubio, to Trump’s assertion that reducing fraud and waste and in Social Security, the nation’s foreign aid programs and better purchasing policies. He chides both the Democrats and GOP for taking too long to “deal with” the solvency of Social Security.

With the spotlight on Cruz, the Texas Senator explained his advocacy for allowing younger workers to put some of their Social Security taxes into a 401 (k) accounts even with the

As president, Cruz pledges that he will not make any changes to Social Security that will impact anyone at or near retirement. “Every benefit will be protected to the letter,” he says, “But for younger workers, we need to change the rate of growth of benefits so it matches inflation instead of exceeding inflation.”

Finally, CNN moderator Bash, reminded Kasich of his position of cutting retirement payments. The Ohio Governor told a New Hampshire voter: “Get over cuts to Social Security benefits,” he says.

Kasich brought up his 1999 plan to save Social Security by allowing young people to have private retirement accounts. During a light hearted moment, Kasich quipped this memorable quote: “Now there are more 18-year-olds who believe they have a better chance of seeing a UFO than a Social Security check and we have a lot of seniors who are very nervous.”

Kasich’s plan to save Social Security is quite simple. “If you’ve had wealth throughout your lifetime, when the time comes to be on Social Security, you’ll still get it. It will just simply be less. And for those people who depend on that Social Security, they’ll get their full benefit. That’s the way it will work. And we don’t have to monkey around with the retirement age. And how do I know that? I’ve done all this before,” he told millions watching the two hour debate.

The writing is on the wall. 2016 GOP candidates for president, except Trump, look to make changes to Social Security to ratchet up the program’s solvency. Those calling for change say they won’t increase program eligibility, cut benefits or privatize the program, to impact aging baby boomers nearing retirement or for current Social Security recipients.

While differing on their political strategies, Democratic presidential contenders — former Secretary of State and New York Senator Hillary Clinton and Senator Bernie Sanders, — seek to strengthen and expand Social Security.

Generation’s X, Y and Z might will consider looking closely at Democratic and Republican presidential candidate positions on fixing Social Security. November’s winner might just tinker with your future retirement program or slash benefits, ultimately impacting how you will financially survive in your retirement years.

Retirement Survey Bleak for Ocean State

Published in Pawtucket Times on February 1, 2016

Here we go again. This month, America’s tiniest state gets outed as being the most unfavorable state to live out your retirement years. According to a new WalletHub study, “2016’s Best & Worse States to Retire,” when compared to all 50 U.S. states and the District of Columbia, Rhode Island came in dead last when compared against 24 metrics falling in one of these three categories (Affordability, Quality of Life and Health Care).

WalletHub, an internet site that calls itself “a personal finance Web site, taps Florida as being the top state to live your retirement years, followed by Wyoming, South Dakota, South Carolina and Colorado. The in-depth analysis, geared to identifying the most retirement-friendly states, gives the Ocean States the distinct of being the worst place to live in your later years, followed by the District of Columbia, Hawaii, Connecticut and Vermont.

As to affordability, WalletHub looked at the adjusted cost of living, tax friendliness of a state, it’s taxation on pensions and Social Security income, and annual cost of in-home services. Rhode Island was ranked 51 (the worst) in affordability for retirees. In zeroing in on this specific variable, the state came in 41st in adjusted cost of living; 45th in annual cost of in-home services and 48th in taxpayer rankings.

For a state’s quality of life, WallettHub zeroed in on an array of variables including the number of theatres, museums, music venues, golf courses. The researchers also checked out crime rates, weather, the number people age 65 and older and whether the state’s labor is elderly friendly. A sampling of Rhode Island specific rankings for this variable include a ranking of 35th for Museums per Capita; 42nd for Theaters per Capita; and 48th for the number of golf courses per Capita; and 32nd in having employed residents age 65 and over.

As for health care, the study examined the number of family physicians, dentists, nurses, and health-care facilities per 100,000 residents, the ranking of the state’s public hospitals, the resident’s life expectancy and emotional health, even taking a look at the death rate for people age 65 and older. Rhode Island ranks 49th in number of family physicians per 100,000 Residents.

WallettHub analyst, Jill Gonzalez, says that for Rhode Island to become a mecca for retirees, state lawmakers must reconsider how they tax Social Security and pensions. The state’s current tax policy “is not at “all friendly toward retirees,” she adds.

According to Gonzalez, the state’s cost of living index is also high at 122 while the national index is 100. This means that if the cost of goods and services nationwide is $100, the Rhode Island retirees will pay $122. Annual costs to pay for home care are nearly $54,000 per year in Rhode Island and state policy makers must find a way to reduce this key community-based service.
Statewide Reactions to Web site Survey

These surveys aggregate data that does not encourage retirement here,” observes AARP Rhode Island State Director Kathleen Connell. “They do not fully measure quality of life or how the proximity to Boston and New York City make Rhode Island attractive to many retirees. But you often hear people talk about retiring in states where lower taxes and deflated housings prices suggest that retirement income will go dramatically farther.

“The tax issue is a reality driven by the state’s so-called ‘structural deficits’ that have resulted in cities and towns raising property and excise taxes. Meanwhile, hikes in fees and new surcharges have added to the tax burden. Legislative leaders face a great challenge in reversing this trend.

“Many people in their 40s and 50s who want to retire in Rhode Island can save more wisely for retirement and find a way to make it work. Anyone entering retirement now with little savings and expecting to rely primarily on Social Security is faced with difficult decisions.

“So, clearly the survey means different things to different people. Few would disagree that Rhode Island is a great place to retire – maybe one of the best places in the nation. If you can afford it.”

Edward Mazze, Distinguished University Professor of Business Administration, says, “I cannot disagree with the quantitative findings in the study. Behind the numbers are two critical factors that have an impact on retiring in Rhode Island – first, the Rhode Island economy has barely grown in the last eight years – second, the negative reputation of the state with government leaders going to jail, high property taxes, poor school systems and unfunded public pension and health programs.”

Mazze calls on the Rhode Island General Assembly to raise the state estate tax level to the same level as the federal estate tax level and exempt social security benefits from state taxes no matter what the income level. “The legislature has to reduce sales taxes and fees, be more transparent in its operations so that individuals trust government actions and fund the social services that retirees need,” he says.

But even with these negative findings retirees should Rhode Island as place to live because of its strategic location, transportation facilities and cultural and recreational activities. However, he acknowledges that “with the high cost of living in Rhode Island and fewer part-time job opportunities for retirees it is difficult to promote the state as a place to retire.”

Ernie Almonte, Rhode Island’s former auditor and partner at RSM US, LLP, a company that performs audit, tax and consulting services, says the changes in how the state taxes Social Security made by lawmakers last year was a good first step. But the former candidate for State Treasurer urges Governor Gina Raimondo and House and Senate Leadership to take a look at the state’s estate tax in the upcoming session. “I believe last year’s changes made by lawmakers was a move in the right direction but we cannot forget the legislative change to the estate cliff effect. “This certainly is a deciding factor for retirees looking to a place to settle down in their retirement years,” he adds.

Almonte also encourages state lawmakers to sit down with the Rhode Island Society of CPA’s to discuss tax policy. “Having a robust discussion on the role of tax policy to pay for necessary services and investments balanced by the ability to pay and the need to pay would be quite helpful to the long run,” he says.
House Speaker Nicholas Mattiello sees the business climate and economic outlook improving as he works to make the state’s tax structure more competitive with neighboring states. He says that the WallettHub survey did not take into account the repeal of state income tax for most Social Security recipients. The State offers retirees “a great quality of life with easy access to our beaches and we have excellent cultural attractions, restaurants, hospitals and universities, he says.

As she has said over her first year, Governor Gina Raimondo is “laser focused” on improving the quality of life for all Rhode Islanders, says deputy press secretary Katie O’Hanlon. “We’ve made a lot of progress over the past year, including eliminating state taxes on Social Security benefits for low and middle-income seniors and increasing funding for Meals on Wheels. However, we can always find ways to improve, says O’Hanlon.

It’s time for the Rhode Island General Assembly to get serious with enacting legislative proposals to attract retirees, more important to keep them from leaving for other retirement havens. Why not do a thorough review of tax policies of WalletHub’s best five places to retire and seek out best tax practices of other states? In the upcoming legislative session, Governor Raimondo and House and Senate leadership might consider reaching out to AARP Rhode Island and aging groups, along with the Rhode Island Society of CPAs, to organize a tax summit, seeking creative ways to tweak the state’s tax code to retain and attract retirees.

This WebHub study can be found at  http://www.wallethub.com/edu/best-and-worst-states-to-retire/18592/.