Dec 27, 2015
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Stay Safe
I've heard that Social Security's Program Service Center in Birmingham, AL has just closed due to the threat of tornadoes. That's a big facility with, I'd guess, hundreds of employees.
An Idea For Improving Retirement Savings
From an Op Ed by Dean Baker in the Los Angeles Times:
The vast majority of Americans who expect to retire in the next decade can count on little income other than their Social Security. This is true not only for low-income workers, who have struggled most of their lives, but also for millions of middle-income workers. ... Many if not most can expect to see sharp reductions in living standards.
The reason for such bleak retirement prospects is the disappearance of traditional defined benefit pensions and the failure of 401(k)-type plans to fill the gap. A recent analysis by the Employee Benefit Research Institute found that, in 2011, only 14% of private-sector employees participated in a defined benefit pension plan. The participation rate has been falling quite rapidly ...
Although many people were hopeful that 401(k)s would be sufficient to support a comfortable day-to-day retirement, this has proved not to be the case. In 2013, the middle fifth of households of people ages 45 to 54 had less than $60,000 in total financial assets. And most homeowners in this age group still had less than 40% equity in their homes, meaning they could look forward to paying off a mortgage well into their retirement.
In response to this situation, Illinois is developing a state-run retirement program that will make it easier and cheaper for workers to save. Many other states, including California, are studying this option. ...
Workers would have a modest amount (around 2% to 3%) deducted from each paycheck, although they could opt out if they chose. The money would then accumulate like a 401(k) during a person's working years, with the option to receive a lump sum or draw a monthly payment at retirement. ...
[P]articipation would be the default option. There is now a considerable body of research showing that workers will contribute to their retirement if they're automatically enrolled, but won't contribute otherwise. ...
[A] publicly run plan would have far lower costs than many privately run alternatives. The administrative fees for a plan in a large state such as California would almost certainly be under 0.5% of the annual holdings. By contrast, private plans can easily charge 1.5% or more. ...
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