Category Archives for Retirement

Is it Really a Happy Birthday for Social Security?

Published in Woonsocket Call on August 23, 2015

With the stroke of his pen, over 80 years ago, on August 14, 1935, President Franklin D. Roosevelt signed the Social Security Act into law.  Over the last eight decades, this domestic program has become one of the most popular federal programs, paying $848 billion to 59 million beneficiaries at the end of calendar year 2014.  During that year, an estimated 166 million people had earnings covered by Social Security and paid taxes.

Celebrating the 80th birthday of Social Security over two weeks ago, AARP released the results of its anniversary survey.  The August 2015 survey followed earlier surveys conducted during previous milestone anniversaries in 1995 (60th), 2005 (70th) and 2010 (75th).  The latest 29 page report found that Americans of all ages continue to have strong feelings of support for Social Security, and this latest survey found several key themes.

According to the national survey of adults detailed in “Social Security 80th Anniversary Survey Report: Public Opinion Trends,” Social Security remains a core part of retirement security, it also remains popular across the generations and political ideologies.

“As we celebrate Social Security on its 80th anniversary, our survey found that it remains as important as ever to American families,” said AARP CEO Jo Ann Jenkins. “We also found that although most want to continue living independently as we age, obstacles to saving often continue to occur in our lives. However, Social Security continues to help generation after generation to diminish these obstacles.”

“When it comes to how important Social Security is to Rhode Islanders, the numbers speak for themselves,” said AARP Rhode Island State Director Kathleen Connell. “210,975 is the number of Social Security beneficiaries in the state; 23.7% say that Social Security provides 90% or more of their total income. And about half say that Social Security represents 50% or more of their income. Without Social Security, many retirees would be living below the poverty line.

“It is plain to see that protecting this key earned benefit is critical. A recent AARP survey found 68% of respondents express at least some concern that they won’t have enough savings to last their lifetime. Imagine if they are given reason to worry more about the viability of Social Security. People who are working toward retirement need to make themselves heard and – as we approach the 2016 elections – hold politicians to their promises to protect Social Security.”

Social Security Key to Surviving Old Age

            Older American’s look to rely on their Social Security checks to pay bills, say the researchers.  Four in five adults (80%) rely or plan to rely on Social Security benefits in a substantial way.  Survey respondents (33%) say that Social Security is the source of income that they rely on or plan to rely on most during their retirement years.

The study finding’s reveal that Social Security has broad support, even across political ideologies and America’s generations, too.  Sixty six percent believe that this domestic program is one of the most important government programs when compared to others. This view has remained consistent over time in similar AARP anniversary surveys taken in 1995, 2005, and 2010.  According to the study, the vast majority of Americans (82%) also believe it’s important to contribute to Social Security for the “common good.”

Like aging baby boomer and seniors, even younger Americans value this program. Specifically, nine in ten adults under 30 (90%) believe Social Security is an important government program, and nearly nine in ten (85%) want to know it will be there for them when they retire.

The survey respondents also want to live independently in their communities at home. The findings indicate that four out of five adults (83%) consider it extremely important to have the ability to stay at home as long as they want; although 64% believe they won’t be able to do so as they age and become frail. Additionally, while 68% feel it extremely important to have family around, 80% want to be able to financially take care of themselves so their children and other relatives won’t have to support them financially.

While recognizing the importance of financial planning, survey respondents say they face a multitude of challenges that keep them from effectively putting away money for their retirement.  Specifically, 69% note that they must focus their income on current financial needs, while 47% believe they do not have enough money left over to put into their retirement savings after paying their monthly bills.  Survey respondents (39%) says health issues and family problems keep them from saving for retirement.

SS Trustee Report Gives Nation a Warning

The six member Social Security Board of Trustees issued its 2015 report, on July 22, giving the nation a snapshot of the fiscal health of the nation’s retirement and disability program.

Within the 257 page report, the Trustees gave a dire warning to Congress.  “Taken in combination, Social Security’s retirement and disability programs have dedicated resources sufficient to cover benefits for nearly two decades, until 2034.  However, the projected depletion date for the separate Social Security’s Disability Insurance (DI) Trust Fund is only a little more than one year away, in late 2016,” says the widely anticipated federal report.  “After the DI trust fund exhaustion, annual revenues from the program’s dedicated payroll and taxation of Social Security benefits will be sufficient to fund about three-quarters of scheduled benefits through 2089.”

According to the Social Security Administration, there were about 10.4 million Americans who received benefits from the DI Trust Fund in 2014, including roughly 42,429 in the Ocean State.  In order to qualify, these beneficiaries are required to have worked in a job covered by Social Security, and must have been unable to work for a year or more due to a disability. If Congress fails to act to direct more funding into the DI trust fund, disabled workers throughout the nation and in Rhode Island will be hit hard financially right in their wallets.

AARP CEO Jo Ann Jenkins offered her observation about the released Social Security Trustees report. “While the Trustees once again report that the combined Old Age, Survivor and Disability Insurance Trust can pay full retirement, survivor and disability benefits for approximately two more decades, we know that if no action is taken, benefits will be cut by nearly 25% in 2034.  As the campaign season gets underway, we will be urging all Presidential candidates to share their plans for the long term solvency and adequacy of Social Security.”

Democrats are calling for an easy fix to shoring up the DI Trust Fund, specifically shifting a small percentage of the Social Security payroll tax from the retirement fund to the disability trust fund.  This has occurred 11 times in the past with bipartisan support.  But, with the 2016 presidential elections now catching the attention of politicos, GOP Senators have threatened to block any transfer of funds, charging that following this strategy is just a way to push the political “hot potato” issue down the road.  Political observers say that this year’s Republican opposition to quickly fixing the DI Trust Fund is a way to force Democrats to the negotiation table to get concessions on higher Social Security payroll taxes or to cut program benefits.

Now, it’s time for Congress to pull together to fix the ailing Social Security program to ensure its future solvency and to adequate fund the DI Trust Fund.  Lawmakers from both sides of the aisle must stop their political bickering and craft a compromise to keep Social Security’s retirement and disability trust funds well-funded and up and running for years to come.  For the sake of older Americans who now rely on their meager Social Security benefits to survive, our elected federal elected officials must begin to act like Statesmen not simple-minded politicians.  Hopefully, the voters will push for this change in thinking when they go into the polls in 2016.

 

 

AARP Pushes for Higher Standards When it Comes to Financial Advisors

Published in Woonsocket Call on June 28, 2015

AARP continues its efforts to push for a proposed U.S. Department of Labor (DOL) Fiduciary Rule that would require financial advisors to put their client’s interests first when giving retirement advice.  In advance of last weeks hearing, before the House Education and Workforce Committee, the nation’s largest aging advocacy group delivered nearly 60,000 petitions containing the signatures from every state to support a higher standard in financial advising to prevent conflicts of interest.    .

In a June 16 release, the Washington, D.C.-based AARP stated that the June 27th Congressional hearing only showcased financial firms and their concerns, but did not provide much of an opportunity to hear directly from consumers about how the new proposed rule would benefit them.  But, AARP’s petitions drive should send a powerful message to Congress, that the nonprofit group, representing 37 million older Americans, and 60,000 voters identified on those petitions want to have their voices heard by Congress on this very pressing retirement issue.

When Advising, Do No Harm

“While a number of investment advisers also support a rule requiring advice to be in the best interest of clients, some opponents have recently weighed in with comments that offer time worn code words for harming consumers,” said Nancy LeaMond, Chief Advocacy and Engagement Officer, AARP.  She says that the delivered petitions would ensure “that all, not just some, financial advisers put their clients’ interests first.”

“Many opponents of the proposed new rule, who are asking for delays or say the regulatory costs are too high, are simply looking to protect high fees at the expense of consumers.  But consumers deserve advice in their best interest, not advice that benefits the adviser,” says LeaMond.

In addition to forwarding petitions to the Department of Labor, AARP volunteers continue their efforts to call on Congress to prevent legislation that seeks to stop or slow an updated “best interest” standard.  According to the AARP, “each year hidden fees, unfair risk and bad investment advice rob Americans of $17 billion of retirement income.”

LeaMond says that AARP plans to submit comments to the DOL on the proposed rule in the weeks ahead. The nonprofit group’s petition delivery included over 33,000 signatures and follows an initial petition delivery last month that included over 26,000 signatures that support eliminating conflicts of interest in retirement advice.  “It is important that the Department hear from individuals who are negatively impacted by the current standard, not just financial firms who benefit from it,” she said.

AARP’s petition drive efforts followed President Obama’s February visit to AARP Headquarters where he used the opportunity to publicly support the proposed DOL rule, endorsed by a coalition of aging, labor and consumer groups that limits conflicts of interest, increases accountability, and strengthens protection for Americans receiving retirement investment advice.

At the AARP press event, Obama called for the updating of DOL rules and requirements that would mandate higher standards for financial advisors, requiring them to act solely in their client’s best interest when giving financial advice.

Obama noted that the existing rules governing retirement investments written over 40 years ago “outdated,” filled with “legal loopholes,” and just “fine print,” to be in need of an overhaul.  The existing rules governing retirement investments were written “at a time when most workers with a retirement plan had traditional pensions, and IRAs were brand new, and 401ks didn’t even exist,” said the President.

According to Megan Leonhardt, senior editor for WealthManagement.com, in a June 15th article, “New Coalition Pushes for DOL Fiduciary Rule,” DOL’s proposed rule has “been delayed multiple times since the agency first rolled it out in 2010.  It was expected to be released in August according to the agency’s regulatory agenda, but an update in May pushed back the date to January.”

“Industry lobbyists have mounted significant pushback. The Securities Industry and Financial Markets Association and the Financial Services Institute have argued a rule similar to the DOL’s initial proposal could limit the public’s access to quality financial advice,” says Leonhardt.

Acting in the Client’s Best Interest

“Rhode Island has been part of the national effort to move the Labor Department rule forward,” said AARP Rhode Island State Director Kathleen Connell. “We’ve talked to people who have been quite surprised to know that their savings could be at risk by having an adviser fail to act in their client’s best interest. The response to the petition campaign is a measure of the concern. Retirement planning is daunting for the vast majority of Rhode Islanders. There’s plenty to worry about. Having confidence that your financial adviser is working in your best interest would relieve some of the anxiety.  That’s why there seems to be overwhelming support for the rule change.”

Along with AARP, Rhode Island federal lawmakers are weighing in on this key retirement issue, seeing its importance to older Rhode Islanders.

Rep. David N. Cicilline (D-RI) says, “Protecting the financial well-being of our seniors is a top priority for me, and ensuring that they have access to complete and accurate information before making investment decisions is an essential component of that effort.  President Obama and Labor Secretary Perez are leading a good faith effort to protect consumers, including seniors and I look forward to evaluating the final rule after the public comment period ends and I have had the benefit of considering these comments.”

Adds, U.S. Senator Sheldon Whitehouse (D) “Investors should have the security of knowing that the advice they receive is in their best interest.  I applaud the Obama Administration for updating regulations on retirement investments and for working with a wide range of stakeholders to ensure the new rules help Americans save more for retirement.”

For this writer, hiring a financial advisor is like purchasing a used care, that is you always feel that you might have made the wrong decision.   New DOL requires that call for higher standards for financial advisors, who would be required to act solely in their client’s best interest when giving advice, just might give me peace of mind, when planning my retirement…and probably to millions of older Americans, too.

Herb Weiss, LRI ’12, is a Pawtucket-based writer covering aging, health care and medical issues.  He can be reached at hweissri@aol.com.

Protecting Retirement Savings Should Be a Priority

Published on March 7, 2015 in the Pawtucket Times

Last month, President Obama used his presidential bully pulpit to publicly support a proposed U.S. Department of Labor (DOL) rule, endorsed by a coalition of aging, labor and consumer groups, that reportedly limits conflicts of interest, increases accountability, and strengthens protection for Americans receiving retirement investment advice.

At the February 23 press conference held at the Washington, D.C.-based AARP headquarters, attended by Obama, Save Our Retirement Coalition members and lawmakers, the President called for the issuing of the proposed rule, still awaiting Office of Management and Budget (OMB) review and final DOL action. The updating of DOL rules and requirements would require higher standards for financial advisors, requiring them to act solely in their client’s best interest when giving financial advice, said Obama.

The Save Our Retirement Coalition says that the final rule is “needed to help protect Americans’ hard earned retirement savings from advisers who recommend investments based on their own interest – such as those that pay generous commissions – not because they serve their clients’ best interest.”

Existing Rules Outdated

In his remarks at AARP, Obama called the rules governing retirement investments written over 40 years ago “outdated,” filled with “legal loopholes,” and just “fine print,” needing an overhaul.  The existing rules governing retirement investments were written “at a time when most workers with a retirement plan had traditional pensions, and IRAs were brand new, and 401ks didn’t even exist,” the President explained.

At the event, Secretary of Labor Thomas E. Perez., claimed that his agency has substantially reached out to “a wide range of stakeholders,” to craft the proposed rule that was sent to OMB.  “The input we have received to date has been invaluable, but we’re not even close to being done. We have a lot more listening to do, and once the Notice of Proposed Rule Making is published in the coming months, I look forward to hearing from as many stakeholders as I can. We’re going to get this right, because the strength of the middle class depends on a secure retirement,” he says.

“We know the people we represent have worked hard to save for retirement, and we believe that they deserve to have financial advisers who work just as hard to protect what they’ve earned,” said AARP CEO Jo Ann Jenkins, in her remarks.  AARP is a member of the Save Our Retirement Coalition.

“AARP, a major consumer advocate, has been fought for this consumer regulation for over five years to ensure that Americans of all ages get the best financial advice when planning for their retirement,” says Jenkins. “Recently AARP also found that 9 out of 10 employers who sponsor retirement savings plans support holding advice to such a ‘best interest’ standard,” she adds. .

“In today’s world, it’s hard enough to save for retirement and achieve your financial goals” added Jenkins. “We don’t need to make it more difficult by allowing some on Wall Street to take advantage of hard-working Americans. Bad financial advice is just wrong,” she says.

According to Save Our Retirement Coalition, “the need for the proposed rule was made starkly apparent in a White House report released showing that conflicts of interest are costing middle class families and billions of dollars annually. The 30 page report, released last month, details the current regulatory environment for financial planners, providing evidence on the negative financial impact of conflicted professional investment advice draining older American’s retirement saving accounts.

The White House report, issued by Council of Economic Advisors, cited evidence pulled from the literature, showing that “conflicted advice reduces investment returns by roughly 1 percentage point for savers receiving that advice” The report also found that “a retiree who receives conflicted advice when rolling over a 401 (k) balance to an IRA at retirement will lose an estimated 12 percent of the value of his or her savings if drawn down over 30 years.  For those receiving conflicted advice “takes withdrawals at the rate possible absent conflicted advice, his or her savings would run out more than 5 years earlier.”

Holding Wall Street Accountable

“Many investment professionals do what’s right,” said AARP Rhode Island State Director Kathleen Connell. ”But loopholes in the law are allowing some on Wall Street  to take advantage of hard-working Americans, recommending investments with higher fees, riskier investments, and lower returns to make even higher profits for themselves. Last year alone, hidden fees, unfair risk and bad investment advice robbed Americans of as much as $17 billion,” she states.

“AARP agrees that financial professionals of all types serve a valuable role in building the wealth and security of the investing public,” added Connell. “We simply want to achieve some consistency in the standards across the industry. Here is Rhode Island, many retirees are very concerned about their investment savings and they deserve protection. Our position is that retirement accounts managed by a broker should receive the same protections as regular investment accounts held with an advisor,” she says.

“Rhode Islanders have who have worked hard for their money and deserve a new standard that holds Wall Street genuinely accountable for helping them choose the best investments for themselves, their family and their future,” she adds.

Security Trade Group Concern

             The Securities Industry and Financial Markets Association (SIFMA), a trade group representing securities firms, banks and asset management companies, is waiting to see the details of the proposed rule.  SIFMA CEO Kenneth E. Bentsen, Jr., stated: “While we cannot comment on a proposal we have not yet seen, we have ongoing concerns that the DOL regulation could adversely affect retirement savers, particularly middle class workers.  The new regulation could limit investor choice, cause inconsistencies as different regulators would apply different standards to the same regulatory accounts, prohibit guidance, and raise the costs of savings for retirement.”

But, both Obama and the Save Our Retirement Coalition strongly disagree with SIFMA’s assessment of the potential impact of DOL’s proposed rule, which has not yet been issued and is ultimately subject to change after the public comment period.

A large majority of financial planners put their clients first when giving them investment advice. But, as you know a few bad apples can truly spoil the barrel.  If trade groups representing financial planners fail to act to rein in financial planners who give conflicted advice to pad their pockets, than federal regulations can quickly do that job by applying “simple, commonsense standards.”

It makes practical and political sense to me.

Here is a linked to President Obama’s comments at the AARP Press Conference: http://www.whitehouse.gov/photos-and-video/video/2015/02/23/president-obama-speaks-aarp.

Herb Weiss, LRI ’12 is a Pawtucket-based writer who covers aging, health care and medical issues.  He can be reached at hweissri@aol.com . Or call 401/ 742-5372.