Retirement Reform Blog

What a sad time in California legislative history.  The opportunity to pass tough but meaningful pension reform has resulted in the passage of a bill akin to throwing a bucket of water on a blazing inferno.  (See Barbara Hollingsworth, “California Rejects Even Modest Pension Reform,”) Read the rest of this entry »

New on the blog!  A corny economics joke: “How many economists does it take to change a light bulb?”  Answer:  “One, if you assume a ladder.”

If you fail to see the humor, this joke reflects the sometimes dubious assumptions in economic theory when making predictions and forecasts.  The latest example is the just-released Medicare Trustees Report.   (For a summary of the Social Security/Medicare Trustees Report, click here.) Obama administration cheerleaders are ooing and awing over the projected unfunded liabilities (the difference between the payroll taxes and seniors’ premiums used to fund Medicare and the benefit payouts.)  According to the 2010 report, the Medicare shortfall into the infinite horizon is expected to be just $36.6 trillion, less than half of last years’s reported liability of $89.3 trillion! What is going on here?  Some highly skeptical assumptions based on the provisions laid out in Obamacare, that’s what.  For example: Read the rest of this entry »

If the latest proposed class action suit picks up speed, shareholders of British Petroleum will be in worse shape than they are now. The Wall Street Journal reports that public pension funds in New York and Ohio are considering a class action suit against BP, citing that the company allegedly misled them about the protocols it had in place to deal with an oil spill.  (See Nathan Becker’s, “Pension Funds Hope to Lead BP Suit“). An expensive, drawn out lawsuit to recover a fraction of the shares held in these pension funds is counterproductive for many reasons. Read the rest of this entry »

Who is going to pick me up?  Government, according to a new Gallup poll.  Among non-retired respondents, one-third expect to rely on Social Security as a “major source of income” at retirement.  This answer ranks second to retirement savings accounts, of which 45 percent cited as a major source of retirement income.  However, it has increased 7 percentage points since 2007 (when only 27 percent were relying on Social Security as a major source of income). Read the rest of this entry »

Yesterday, the New York Times featured a story on the sad state of Social Security.  Actuaries expect that this year, benefits paid out to seniors will exceed payroll taxes taken in.  This is likely due to the higher unemployment rate, resulting in less payroll tax revenue, and the possibility that people age 62 and over who did not plan on retiring just yet are facing job losses and choosing to draw on their Social Security benefits.

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The terms “filial responsibility” and “filial support” refer to an adult child’s obligation to render care to aging parents.  Before Medicare and Social Security, children were obliged to meet their filial responsibilities by filial support laws.  These laws gave children the primary responsibility in caring for elderly parents – neglecting to do so could yield financial consequences.

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Over the past several days, I have read some articles about the fact that next year's Social Security benefit payments will not be increasing as they normally do to keep up with inflation.  This is what is known as the cost of living adjustment (COLA).  According to some politicians and advocates, with rising health care costs, seniors are getting the short end of the stick unless an increase is in order.

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A recent New York Times article discusses whether the best time to retire is at 62 (early retirement) or at 70.  Its conclusion: hold out as long as you can.  This must, however, be taken with a grain of salt.  Getting the timing of retirement right depends on several factors, and no two families are exactly alike.

For a single person, probably the most important question is how long do you plan to live?  If you are "in poor health and probably won't live past 78," you might want to take benefits at early retirement, says the Times.  Ideally, if you expect to live a long time and can work past retirement, then 70 is the best time to take benefits.  

If long life is the expectation, but you can't work till 70, then 66 seems to be the magic number.  This option is best even if a retiree has to use retirement savings to make it to 66 to file for Social Security benefits.  That's because the increase in benefits gained by retiring at 66 instead of 62, eventually makes up for the savings used to make it to 66.  Waiting any longer than 66, seems to exhaust savings too much to make up for higher Social Security benefits.

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Fresh from the Employee Benefit Research Institute, a new survey found that many people plan on postponing retirement and working longer than they originally anticipated.  The reasons?  A bear market, economic worries, and less confidence in how much they have saved for retirement.

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In the spring, the Social Security Trustees released their annual report on the sad state of Social Security and Medicare.  To sum it up, both programs have a combined total of nearly $102 trillion in unfunded liabilities.  This means that we would need to have that much money in the bank today, earning interest, in order to pay Social Security and Medicare benefits to all current and future retirees into perpetuity.

But suppose both entitlement prograns ended tomorrow – no more payroll taxes collected, and no benefits paid to next generation retirees.  What would happen to that massive debt?  Not to ruin the holiday spirit, but according to NCPA Senior Fellows Andy Rettenmaier and Thomas Saving in their latest study, we would still owe our current retirees, baby boomers and younger workers who have accrued benefits a staggering $52 trillion!  Santa has a tall order to fill this year.