Talking Retirement

A Proposed Social Security Reform Plan

Democrats get chance to fix Social Security, an article from the Detroit Free Press, outlines a proposal floating around Washington called the LMS plan, named for the people who’ve worked on the plan. Here are the details:

• Change benefit formulas to reduce payments to future retirees, especially wealthy people.
• Increase to 68 the age at which full Social Security retirement benefits would become available and reduce early retirement benefits.
• Create mandatory personal retirement accounts funded through a combination of new payroll deductions and contributions from Social Security trust-fund surpluses.
• Let people invest the accounts in any of 15 private fund companies certified by the government.
• Make 90% of a worker’s earnings subject to the FICA payroll tax—that’s where it was in 1982—and do away with the current annual cap ($94,200 in 2006 and $97,500 for 2007).
• Create a minimum benefit for workers who spend many years earning low wages.

The article also has an interesting side bar called “Options for Social Security” that gives 3 basics of what Social Security reform might look like. Read the article here.

The Wave of Boomer Retirement Gathers Momentum

In Baby boomers reaching point of mass retirement, one employer sees a rapid change in her workforce. “My eyes opened,” she said. “I was about to have 150 years of experience walk out the door at any time. In the U.S., someone turns 60 every seven seconds.”

What’s an employer to do? Just as we talked about in a previous entry, companies can meet this dilemma by making older workers want to continue working longer.

Read the article.

Happy Thanksgiving!

I’m off spending time with my family for the holiday. Thanks for reading Talking Retirement. Check in again next week for more talking about retirement.

Financial Companies Want to Consolidate Your Retirement Funds

Have you noticed an increase in the marketing messages from financial companies for your retirement dollars? You’re not imagining things, according to Using Retirement to Recruit Business, from ABC News.

As the oldest of the baby boomers — those born between 1946 and 1964 — begin to approach their retirement years, the companies that helped them accumulate their retirement savings don’t want to lose those assets.

The good thing about so many companies courting boomers is that there is a lot of choice out there. If you like to share your story about how you manage your retirement savings, click Talk Back below and let us know. 

Read the story here.

Is the Sky Falling Because of Boomer Retirements? Maybe Not. 

You’ve probably read some of the stories we’ve talked about here that predict that the mass retirement of the baby boom generation could plunge the economy into recession. Robert Powell, of MarketWatch, interviews the authors of a new book, Aging Nation—The Economics and Politics of Growing Older in America. They see things differently.

The changing demographic structure of the population is relatively new and is challenging, but it does not necessitate a radical overhaul of our social institutions and a decline in our well-being in our later years. There is no need to drastically change the many positive aspects of old age that the current generation of old people enjoy.

Want to know more? Read the article.

Paying People Not to Retire Works

Pingle found that each percentage point increase in the Delayed Retirement Credit, or DRC, “led to a percentage point increase in the employment rate of men aged 65 to 70.”

Mr. Pingles study indicates that we could raise the DRC to delay retirement even more. Read the news article.

The DRC is already part of the current Social Security system. According to the Social Security web site, “with delayed retirement credits, a person can receive his or her largest benefit by retiring at age 70.” For more information click here.

Government Warns of Social Security Email Scam

Did you get an email from the Social Security administration? Don’t believe it. The Social Security Administration has issued a warning that there is a fraud email going around trying to steal personal information, as reported by an ABC TV affiliate.

Currently, this scam’s email has a subject line that reads “Cost-of-Living for 2007 Update.”

The fake email goes on the say, “NOTE: We now need you to update your personal information. If this is not completed by November 11, 2006, we will be forced to suspend your account indefinitely.”

The details of this type of scam change over time, so be very cautious. Call the Social Security office if you’ve been a victim at 1-800-269-0271. Read the story.

Public Pensions Payout In Question

Years of supporting court interpretations have enshrined the view that once a public employee has earned a pension, no one can take it away. Even during New York City’s fiscal crisis 30 years ago, no existing pension promises were reduced.

But now a number of state and local governments are quietly challenging those guarantees. Financially troubled San Diego is the highest-profile example, but a handful of states, cities and smaller government bodies have also found ways to scale back existing promises and even shrink some current payments.

According to the article, “the nation’s states and cities… have promised a total of about $1.4 trillion” in pension payouts and very little of that money has been set aside. Want to know more? Read the article.

5 Random Retirement Questions

As the title of the article suggests, these are not just questions that relate to an older person’s situation. Two of the questions are from young people just starting out. How often do you hear a question about diversification of assets from a 13-year-old? Click here for the article.

Social Security Reform to Resurface After Elections

According to a story from Reuters, Social Security reform is on President Bush’s agenda of issues to bring up after next week’s elections. According to the article, the president says he wants a bi-partisan approach, and said, “I think it’s going to be very important for people to let—if they are genuinely interested in going forward—is to not put any preconditions on it.” I take that to mean he will again push to privatize the system like he attempted to do last time.

Personally, I believe we’ve already privatized our retirement savings a lot over the last 20 years or so. Many of us have 401k plans and personal savings as our means to live during our retired years. Those funds are highly influenced by economic situation at the time of your retirement. The Social Security system is a minimal safety net in its current state but at least it exists as an option insulated from economic ups and downs. Privatizing it would subject it to the same market forces that could potentially disrupt our 401k plans leaving us all with the possibility of nothing during our elder years. What are your thoughts?

Also, check out the article from Reuters here.