Washington Policy Watch

News and perspective on public policy issues affecting Washington's economy and quality of life, brought to you by the Economic Opportunity Institute.

October 12, 2011 • 9:22 am 0

Social Security must keep ensuring dignity for all

From the Everett Herald:

john burbank

John Burbank, Executive Director, EOI

It used to be that working hard and playing by the rules earned most people economic security and the ability to retire with dignity. But jobs are being outsourced, the jobs that remain offer lower wages and fewer benefits, and the retirement savings of most Americans has been decimated by the stock market — if it wasn’t already used to pay the mortgage.

Employers are shifting pension costs onto workers in a fend-for-yourself retirement system. The typical defined contribution retirement account held only $17,794 in 2009. The typical retirement account for people who had been putting money in from 2003 to 2009 was $59,381.

That may seem like a big number, but it’s closer to peanuts. The best retirement accounts provide a stream of income until death. That’s called an annuity, and at $59,381, it would be $285 per month. At $17,794, it’s closer to $85 a month. Both figures leave the retiree living in severe poverty.

Fortunately, one underpinning of the American Dream remains intact: Social Security. Read the rest of this entry »

Filed under: retirement security, , , , , , ,

August 26, 2011 • 7:00 am 0

Eliminate the Social Security caregiving penalty to boost women’s economic security

By Tatsuko Go Hollo, EOI Intern

Women have long been identified as society’s caregivers, and there’s plenty of research to back that up. Not only do women spend twice as much time as men caring for members of the household, but nearly three quarters of elder care is performed by women.

Unfortunately, much of this caregiving is unpaid, which can result in disproportionate economic insecurity among women. You might have heard of this referred to as the “motherhood penalty” or “caregiver penalty.”

This penalty affects women’s ability to obtain full-time work, maintain consistent employment and receive benefits through employers. It also reduces the amount of Social Security benefits a caregiver receives in older age. Because so much of this work is unpaid, caregivers have a shorter history of wage work.

This penalty is obvious in the Social Security benefit calculations, as Social Security benefits are based on an average of wages collected over 35 years. For people who spend periods of time out of the workforce to raise children or care for a vulnerable family member, those years are counted as ‘zeros’ in the benefit formula. This results in a lower overall benefit, which is reflected in the lesser benefits received by women over 65 compared to men of the same age.

One alternative to help mitigate this penalty is to provide a credit for time spent caregiving. For example: for each year spent raising children, a parent could eliminate one year – up to a total of five years – from the 35 year averaging period. This means benefits would be calculated based on a 30 year average, offering stay-at-home parents a higher benefit and more economic security in older age.

This idea isn’t novel, as a similar method of calculating benefits is used for disabled beneficiaries.  However, it is an approach that could boost Social Security’s already powerful ability to keep women out of poverty. It’s also an approach that deserves more consideration from policymakers who are committed to ensuring Social Security is most effective in providing the economic security it promises.

This blog post is part of the #HERvotes blog carnival.

Filed under: retirement security, , , , ,

May 21, 2011 • 10:08 am 0

Quick facts: Social Security is vital to Washington women, families

Via the National Women’s Law Center:

Social Security is a family insurance plan that provides retirement benefits and life and disability insurance to Washington’s working families.

  • About 1 in 6 residents – about 1,046,200 people – receives disability, survivor, and/or retirement benefits from Social Security.
  • 93 percent of residents 65 and older receive Social Security benefits.
  • About 70,500 children receive Social Security benefits because of the loss of a parent’s income due to death, disability or retirement.
  • About 180,900 disabled workers and their family members receive Social Security benefits.
  • About 80,000 widowed spouses receive Social Security survivor’s benefits. (Nationally, women represent virtually all (99 percent) of spouses receiving survivor benefits.)

Washington women depend on modest Social Security benefits to get by.

  • Women are a majority of both adult beneficiaries and beneficiaries 65 and older.
  • The average Social Security benefit for women 65 and older is about $12,400 per year, compared to about $16,500 for men 65 and older.
  • Older women rely more on income from Social Security than older men do. Median income for women 65 and older living alone is $18,200 per year – and Social Security represents 72 percent of that amount. Median income for comparable men is $27,500 – and Social Security represents 48 percent of that amount.

Social Security is a critical anti-poverty program for Washington women and families.

  • Social Security lifted 312,000 residents out of poverty, including 14,000 children.
  • Social Security dramatically reduced poverty rates for women 65 and older: from 43 to 10 percent for all women 65 and older, and from 63 to 16 percent for older women living alone.

Filed under: retirement security, ,

May 10, 2011 • 8:47 am 1

Shift to defined contribution plans decreases retirement security for workers

From Public Pensions in Washington State:

pension brief cover

Public Pensions in Washington State

As of 2008, 31% of all private sector workers participated in a defined contribution (401k-style) retirement plan at their workplace, 3% in pension plans and 12% were enrolled in both. 54% of all private sector workers were not covered under a workplace retirement plan.

Pensions guarantee workers a retirement benefit calculated from work history and wages. The employer pays into the retirement fund, and retains the fiscal responsibility to insure those funds are secure – offering economic security and certainty to retirees.

In contrast, defined contribution plans are often funded primarily by the employee, sometimes with an employer match. The employee, not the employer, is responsible for managing the money in these accounts. But these accounts are risky – the typical portfolio lost one-third of its value in the stock market crash of 2008, and has not yet recovered the value it held in 2003.

The switch to defined contribution plans, the shrinking of pension benefits, and the majority of private sector workers left outside of any plans for retirement savings are part of a great shift undermining a middle class quality of life, diminishing corporate social responsibility, and increasing corporate profits.

While workers witnessed diminishing pensions, corporate profits enjoyed their best year ever in 2010, growing 37% to $1.24 trillion, with the financial services industry taking $367 billion of this.

Filed under: retirement security, ,

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