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The Middle-Class Squeeze: A Picture of Stagnant Incomes, Rising Costs, and What We Can Do to Strengthen America’s Middle Class

October 21, 2014 Comments off

The Middle-Class Squeeze: A Picture of Stagnant Incomes, Rising Costs, and What We Can Do to Strengthen America’s Middle Class
Source: Center for American Progress

The American middle class is in trouble.

The middle-class share of national income has fallen, middle-class wages are stagnant, and the middle class in the United States is no longer the world’s wealthiest.

But income is only one side of the story. The cost of being in the middle class—and of maintaining a middle-class standard of living—is rising fast too. For fundamental needs such as child care and health care, costs have risen dramatically over the past few decades, taking up larger shares of family budgets. The reality is that the middle class is being squeezed. As this report will show, for a married couple with two children, the costs of key elements of middle-class security—child care, higher education, health care, housing, and retirement—rose by more than $10,000 in the 12 years from 2000 to 2012, at a time when this family’s income was stagnant.

As sharp as this squeeze can be, the pain does not stop at one family, or even at millions of families. Because of the critical role that middle-class consumers play in creating aggregate demand, the American economy is in trouble when the American middle class is in trouble. And the long-term health of the U.S. economy is at risk if financially squeezed families cannot afford—and smart public policies do not support—developing the next generation of America’s workforce. It is this workforce that will lead the United States in an increasingly open and competitive global economy.

This report provides a snapshot of the American middle class and those struggling to become a part of it. It focuses on six key pillars that can help define security for households: jobs, early childhood programs, higher education, health care, housing, and retirement. Each chapter is both descriptive and prescriptive—detailing both how the middle class is doing and what policies can help it do better.

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A Diversity of Risks: The Challenge of Retirement Preparedness in America

October 14, 2014 Comments off

A Diversity of Risks: The Challenge of Retirement Preparedness in America
Source: Bipartisan Policy Center

Many Americans are anxious about their retirement prospects. In fact, a recent Gallup poll found that not having enough money for retirement is the number one financial worry among Americans. For some, this concern is justified, as they face the daunting prospect of running short of money in their later years. But there is considerable variation in preparedness for retirement, and the challenges are more complicated than many realize.

When evaluating the retirement security landscape, complexity is the one constant. Potential sources of retirement income are numerous and varied, including: continued work (perhaps on a part-time basis), Social Security benefits, drawdown of personal savings, workplace retirement plans, annuities, home equity, financial support from family members, and more. Understanding this patchwork and building a solid foundation upon which to retire is no easy task for the average American.

Additionally, even for those who do accumulate substantial resources, retirees’ incomes and living standards are subject to a variety of risks, such as poor investment choices or returns, unexpected medical bills, outliving one’s savings, and needing expensive long-term care.

The U.S. retirement landscape is difficult to describe for the “average” person because the state of any particular retiree’s finances depends so heavily on which sources of income they have, how much they have, and what life events occur that could drain their nest egg.

The Bipartisan Policy Center’s (BPC) Commission on Retirement Security and Personal Savings is examining the U.S. retirement system. Next year, the commission will make comprehensive recommendations to improve the financial security of Americans preparing for and in retirement. In advance of these recommendations, BPC staff is producing a series of white papers to highlight the retirement security challenges that public policy can address.

After a brief overview of the retirement system, this first white paper explores retirement preparedness through the lives of four fictional families, showing how they are preparing for retirement, what they could be doing better, and the risks that they will face over the course of their working years and their retirements.

Which Employees Are Delaying Retirement and Why?

October 13, 2014 Comments off

Which Employees Are Delaying Retirement and Why?
Source: Towers Watson

AT A GLANCE

  • 34% of workers under 40 believe that retirement delays among older workers are restricting their career opportunities.
  • Aside from retirement savings, health and stress have the strongest links to retirement timing.
  • Offering employees greater retirement security can help employers cultivate a less stressed, healthier and more engaged workforce.

Social protection for older persons: Key policy trends and statistics

October 3, 2014 Comments off

Social protection for older persons: Key policy trends and statistics
Source: International Labour Organization

This policy paper: (i) provides a global overview of the organization of pension systems, their coverage and benefits, as well as public expenditures on social security, in 178 countries; (ii) analyses trends and recent policies, e.g. extension of coverage in a large number of low- and middle-income countries; (iii) presents the negative impacts of fiscal consolidation and adjustment measures in a number of higher-income economies; and (iv) calls for the expansion of social protection in pursuit of crisis recovery, inclusive development and social justice.

CRS — The Effect of Firm Bankruptcy on Retiree Benefits, with Applications to the Automotive and Coal Industries (September 22, 2014)

October 2, 2014 Comments off

The Effect of Firm Bankruptcy on Retiree Benefits, with Applications to the Automotive and Coal Industries (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

Benefits for retired employees are of particular interest to policy makers because of the growing number of retirees and forecasts indicating that some future retirees may not have the necessary financial resources to maintain their standards of living. Part of this congressional concern is what happens when bankrupt employers are unable to provide promised pension and health benefits to their retired employees.

In chapter 11 bankruptcy reorganization, the employer receives protections against its financial commitments in the hope that it may once again become profitable. This protection could include not having to honor obligations concerning pensions and retiree health insurance. Its employees may therefore be at risk of not receiving some of their promised benefits. Unionized and nonunionized employees may be treated differently under the law because unionized workers have a legal contract governing their terms and conditions of employment.

UK — Statistical bulletin: Characteristics of People and Households Without a Private Pension

October 1, 2014 Comments off

Statistical bulletin: Characteristics of People and Households Without a Private Pension
Source: Office for National Statistics

Key points

  • For those below retirement age, 45% of men and 49% of women in Great Britain did not have any private pension savings in 2010-2012.
  • 95% of men and women working in Accommodation and food service industries did not pay into a private pension in the UK in 2012. In ‘Public administration, defence and social security’ only 7% of men and 9% of women did not pay into a private pension.
  • A third of employees, nearly half of the self-employed and around 80% of men and women ‘not in work’ did not have any private pension savings in Great Britain in 2010-2012.
  • 76% of women in routine occupations did not have a private pension in Great Britain in 2010-2012 compared to 15% of women in higher managerial and professional occupations, a difference of 61 percentage points.
  • The median of the sum of property, physical and financial wealth was £160,000 for households with a private pension in Great Britain. This is nearly seven times larger than for households without a private pension at £23,900.

EU — Labour force survey statistics – transition from work to retirement

September 19, 2014 Comments off

Labour force survey statistics – transition from work to retirement
Source: Eurostat

This article presents selected results from the EU Labour force survey (LFS) and its 2012 ad hoc module on the transition from work to retirement for the European Union (EU) and all its Member States, as well as for three EFTA countries. The data explain the transition from work to retirement, looking at types of pensions, the age at which people start receiving a pension, early retirement, persons who continue working after starting to receive a pension and the reasons for this, etc.

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