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If we do nothing in ten years, 40% of middle-aged workers will have poor people in retirement poverty – a possible political flashpoint and a certain human tragedy. Older workers do not have adequate retirement accounts and social security will not be enough for most retirees to maintain their standard of living. The median older worker, aged 55 to 64, has only $ 15,000 in his retirement account; the middle class worker has $ 60,000; and even those in the top 10% of the income distribution do not have enough, the median balance is only $ 200,000.
Two solutions could ensure adequate retirement income without additional costs or new bureaucracy. Congress could allow social security to manage bridge annuities to help people delay the claim for social security benefits and allow people to buy additional social security credits. Social security should innovate quickly to save the future of retirement for Americans.
Although most people do not have sufficient retirement income to spread their retirement, many can use their IRAs and 401 (k) s to delay the claim for higher social security benefits. 70 years old. My co-author and I, Tony Webb, propose that Social Security Administration Help people use their retirement account to move to a higher social security benefit. In a recent innovation competition organized by AARP, in collaboration with another co-author, Michael Papadopoulos, we also proposed to purchase additional social security credits, called catch-up credits.
Correction # 1: Bridge Annuities: Workers must maximize their social security benefits by spending their IRA and 401 (k) balances and deferring claims. Congress could help people do this effectively by allowing social security to convert pension balances to "fill" pensions to create a delay in social security payments.
Take Wanda, an average employee who has $ 100,000 in her retirement account. She has several choices and unless she has a life-threatening illness and no spouse, only one is a good choice. His bad choice is to keep $ 100,000 and claim a reduced social benefit of $ 1,125 to age 62. His good choice is to defer the Social Security claim until age 70 to get a monthly premium of $ 1,980. How would she survive these 8 years of waiting? Wanda can manage in eight years by spending $ 100,000.
Another way to see how the gateway can maximize the benefits is to calculate the present value of Wanda's choices. If Wanda waits, she gets more in terms of current value. A price-indexed annuity of $ 1,125 at the age of 62 in 2018 is worth about $ 291,000. But a monthly pension of $ 1,980 in 2026 is worth $ 307,000 today! And people could choose how long to spend. Gateway until age 63 with $ 100,000 and live with $ 8,502 a month. Footbridge until 70 years old and live with 1230 dollars a month until the social security allowance of 1980. The bridge works with more or less money and at different ages.
Fix # 2: Purchase of additional catch-up credits for social security
The Congress could also help workers increase their social security benefits for life by paying catch-up contributions of 3.1% of Social Security pay from the age of 50. This additional credit would increase the chances of survival. The proposed program uses the existing structure of social security. This would not increase the social security deficit, but would strengthen the financial health of the program. All workers would get a decent return on their contributions of 3.1%. Low- and middle-income workers would earn 7% more than their pre-retirement earnings, while high-income earners would earn 3-4%. The detailed proposal is here
Social security needs more income – raising the payroll tax from 12.4% to 15.4% and / or increasing or removing the taxable income ceiling. Without more income, social security benefits will decline by 25% for median retired households in less than 15 years.
But Congress should move forward and not just maintain the current benefits. Social security is a well-run and efficient agency. It can effectively spread the risks over a large population and over time. The addition of transitional pensions and catch-up credits to social security reform is the type of old-age income security that we desperately need, while the current US retirement system collapses so well described in the document. the Wall Street newspaper this summer.
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Getty Images / Royalty Free
If we do nothing in ten years, 40% of middle-aged workers will have poor people in retirement poverty – a possible political flashpoint and a certain human tragedy. Older workers do not have adequate retirement accounts and social security will not be enough for most retirees to maintain their standard of living. The average older worker, aged 55 to 64, has only $ 15,000 in his retirement account; the middle class worker has $ 60,000; and even those in the top 10% of the income distribution do not have enough, the median balance is only $ 200,000.
Two solutions could ensure adequate retirement income without additional costs or new bureaucracy. Congress could allow social security to manage bridge annuities to help people delay the claim of social security benefits and allow people to buy additional social security credits. Social security should innovate quickly to save the future of retirement for Americans.
Although most people do not have sufficient retirement income to spread their retirement, many can use their IRAs and 401 (k) s to delay the claim for higher social security benefits. 70 years old. My co-author and I, Tony Webb, propose that Social Security Administration help people use their retirement account to get a higher social security benefit. In a recent innovation competition organized by AARP, in collaboration with another co-author, Michael Papadopoulos, we also proposed to purchase additional social security credits, called catch-up credits.
Solution # 1: Bridge Annuities: Workers must maximize their social security benefits by spending their IRA and 401 (k) balances and deferring claims. Congress could help people do this effectively by allowing social security to convert pension balances to "fill" pensions to create a delay in social security payments.
Take Wanda, an average employee who has $ 100,000 in her retirement account. She has several choices and unless she has a life-threatening illness and none of the spouses is the only one, it's a good choice. Her bad choice is to keep her at $ 100,000 and claim a $ 1,125 social security reduction at age 62. His good choice is to delay the Social Security application until the age of 70 to get a monthly amount of $ 1,980 for life. How would she survive these 8 years of waiting? Wanda can manage in eight years by spending $ 100,000.
Another way to see how the gateway can maximize the benefits is to calculate the present value of Wanda's choices. If Wanda waits, she gets more in terms of current value. A price-indexed annuity of $ 1,125 at the age of 62 in 2018 is worth about $ 291,000. But a monthly pension of $ 1,980 in 2026 is worth $ 307,000 today! And people could choose how long to spend. Go to age 63 with $ 100,000 and live with $ 8,502 a month. Footbridge until 70 years old and live with 1230 dollars a month until the social security allowance of 1980. The bridge works with more or less money and at different ages.
Fix # 2: Purchase of additional catch-up credits for social security
The Congress could also help workers increase their social security benefits for life by paying catch-up contributions of 3.1% of Social Security pay from the age of 50. This additional credit would increase the chances of survival. The proposed program uses the existing structure of social security. This would not increase the social security deficit, but would strengthen the financial health of the program. All workers would get a decent return on their contributions of 3.1%. Low- and middle-income workers would earn 7% more than their pre-retirement earnings, while high-income earners would earn 3-4%. The detailed proposal is here
Social security needs more income – raising the payroll tax from 12.4% to 15.4% and / or increasing or removing the taxable income ceiling. Without more income, social security benefits will decline by 25% for median retired households in less than 15 years.
But Congress should move forward and not just maintain the current benefits. Social security is a well-run and efficient agency. It can effectively spread the risks over a large population and over time. The addition of transitional pensions and catch-up credits to social security reform is the type of old-age income security that we desperately need, while the current US retirement system collapses so well described in the document. the Wall Street newspaper this summer.
