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A Look at the End-of-Life Financial Situation in America

May 21, 2015 Comments off

A Look at the End-of-Life Financial Situation in America
Source: Employee Benefit Research Institute

  • This report takes a comprehensive look at the financial situation of older Americans at the end of their lives. In particular, it documents the percentage of households with a member who recently died with few or no assets. It also documents the income, debt, home-ownership rates, net home equity, and dependency on Social Security for households that experienced a recent death.
  • Significant findings include that among all those who died at ages 85 or above, 20.6 percent had no non-housing assets and 12.2 percent had no assets left. Among singles who died at or above age 85, 24.6 percent had no non-housing assets left and 16.7 percent had no assets left.
  • Data show those who died at earlier ages were generally worse off financially: 29.8 percent of households that lost a member between ages 50 and 64 had no assets left. Households with at least one member who died earlier also had significantly lower income than households with all surviving members.
  • The report shows that among singles who died at ages 85 or above, 9.1 percent had outstanding debt (other than mortgage debt) and the average debt amount for them was $6,368.
  • The report also shows that the importance of Social Security to older households cannot be overstated. For recently deceased singles, it provided at least two-thirds of their household income. Couple households above 75 with deceased members received more than 60 percent of their household income from Social Security.

Trends in Social Security Claiming

May 21, 2015 Comments off

Trends in Social Security Claiming
Source: Center for Retirement Research at Boston College

The brief’s key findings are:

  • Over the past 25 years, the average retirement age for U.S. workers has been rising, a trend that should align with when people first claim Social Security.
  • But the percentage of all initial claimants who are age 62 shows little change until recently.
  • A better metric to capture claiming behavior over time – when the population is aging – is the percentage of workers turning age 62 who claim at 62.
  • This measure, based on unpublished Social Security data, shows a steep decline in claiming at 62 since the mid-1990s: from 56 percent to 36 percent for men.
  • In short, while more than a third of workers still claim right away, a growing number are waiting until their mid-60s or later.

Family Support in Graying Societies

May 21, 2015 Comments off

Family Support in Graying Societies
Source: Pew Research Center

The United States is turning gray, with the number of people ages 65 and older expected to nearly double by 2050. This major demographic transition has implications for the economy, government programs such as Social Security and families across the U.S. Among adults with at least one parent 65 or older, nearly three-in-ten already say that in the preceding 12 months they have helped their parents financially. Twice that share report assisting a parent with personal care or day-to-day tasks. Based on demographic change alone, the burden on families seems likely to grow in the coming decades.

Germany and Italy, two of the “oldest” nations in the world, after only Japan, are already where the U.S. will be in 2050: a fifth of the population in each country is age 65 or older. Compared with the U.S. today, a higher share of adults in Germany and Italy report helping their aging parents with basic tasks, and more in Italy have also provided personal care. However, in both countries, fewer adults than in the U.S. say they have provided financial assistance to their aging parents.

CRS — Federal Employees’ Retirement System: The Role of the Thrift Savings Plan (3/10/15)

May 20, 2015 Comments off

Federal Employees’ Retirement System: The Role of the Thrift Savings Plan (PDF)
Source: Congressional Research Service (via Cornell University ILR School)

Federal employees participate in one of two retirement systems. The Civil Service Retirement System (CSRS) was established in 1920 and covers only employees hired before 1984. Participants in the CSRS do not pay Social Security payroll taxes and they do not earn Social Security benefits. For a worker retiring after 30 years of federal service, a CSRS annuity will be equal to 56.25% of the average of his or her highest three consecutive years of basic pay.

Because the Social Security trust funds needed additional cash contributions to remain solvent, the Social Security Amendments of 1983 (P.L. 98-21) required federal employees hired after 1983 to participate in Social Security. To coordinate federal pension benefits with Social Security, Congress directed the development of a new retirement system for federal employees hired after 1983. The result was the Federal Employees’ Retirement System (FERS) Act of 1986 (P.L. 99- 335).

CRS — Mandatory Spending Since 1962 (March 18, 2015)

March 25, 2015 Comments off

Mandatory Spending Since 1962 (PDF)
Source: Congressional Research Service (via Federation of American Scientists)

Federal spending is divided into three broad categories: discretionary spending, mandatory spending, and net interest. Mandatory spending is composed of budget outlays controlled by laws other than appropriation acts, including federal spending on entitlement programs. Entitlement programs such as Social Security and Medicare make up the bulk of mandatory spending. Other mandatory spending programs include Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), unemployment insurance, some veterans’ benefits, federal employee retirement and disability, and Supplemental Nutrition Assistance Program (SNAP). In contrast to mandatory spending, discretionary spending is provided and controlled through appropriations acts. Net interest spending is the government’s interest payments on debt held by the public, offset by interest income that the government receives.

The Power of the Purse: The Contributions of Hispanics to America’s Spending Power and Tax Revenues in 2013

March 3, 2015 Comments off

The Power of the Purse: The Contributions of Hispanics to America’s Spending Power and Tax Revenues in 2013
Source: Partnership for a New American Economy

The Partnership for a New American Economy’s new report, “The Power of the Purse: The Contributions of Hispanics to America’s Spending Power and Tax Revenues in 2013,” highlights the important role that both native and foreign-born Hispanics play as consumers and taxpayers, as well as their contributions to Medicare and Social Security programs.

Key findings include:

  • Hispanic households, both native and foreign-born, account for a large portion of America’s overall spending power. In 2013, Hispanics had an estimated after-tax income of more than $605 billion. That figure is equivalent to almost one out of every 
10 dollars of disposable income held in the United States that year. Foreign-born Hispanic households made up a sizeable portion of that figure: We estimate their spending power totaled $287 billion that year.
  • The growing earnings of Hispanic households have made them major contributors to U.S. tax revenue. In 2013, Hispanic households contributed more than $190 billion to U.S. tax revenues as a whole, including almost $67 billion in state and local tax payments. Of this, foreign-born Hispanics contributed more than $86 billion in tax revenues nationwide. That included almost $32 billion in state and local taxes and more than $54 billion in taxes to the federal government.
  • In some states, Hispanics now account for a large percentage of spending power and tax revenues overall. In both Texas and California, Hispanic households had more than $100 billion in after-tax income in 2013, accounting for more than one of every five dollars available to spend in each state that year. In Arizona, a state with a rapidly growing Hispanic population, their earnings after taxes accounted for almost one-sixth of the spending power in the state. In Florida, Hispanics contributed more than one out of every six dollars in tax revenue paid by residents of the state.
  • Hispanics, and foreign-born Hispanics in particular, play an important role sustaining America’s Medicare and Social Security programs. In 2013, Hispanic households contributed more than $98 billion to Social Security and almost $23 billion to the Medicare’s core trust fund. Foreign-born Hispanics in particular contributed more than $46 billion to Social Security, while paying in more than $10 billion to the Medicare program. Past studies have indicated that in Medicare in particular, immigrants draw down far less than they put in to the trust fund each year, making such tax contributions particularly valuable.

The Effect of Rising Inequality on Social Security

February 27, 2015 Comments off

The Effect of Rising Inequality on Social Security
Source: Center for American Progress

The nation’s Social Security system has long been a bedrock of economic security, protecting nearly all American workers and their families in case of retirement, disability, or the death of a primary breadwinner. Some 239 million workers ages 20 and older are insured under the program. In 2013, Social Security provided benefits to 58 million people, including 41 million retirees and dependents of retirees, 6 million survivors of deceased workers, and 11 million disabled workers and dependents of disabled workers.

Over the past three decades, however, rising inequality has increasingly threatened the notion of shared economic security. Those at the top of the income spectrum have seen tremendous gains, while most Americans have watched their wages decline or stagnate amid rising costs. In the wake of the Great Recession, the top 1 percent of households captured roughly 76 percent of inflation-adjusted income gains between 2009 and 2013.

Much of the leap made by the very rich is attributable to nonwage forms of income such as capital gains, but huge disparities also persist when looking only at wages, which form the basis for Social Security tax revenues because payroll taxes only apply to wage income. In 2013, for example, the top 1 percent of earners took home about 12.9 percent of the nation’s total wage income in 2013—nearly as much as the share received by the entire bottom half of workers, who captured approximately 13.7 percent of wage income. This growing divide in wages—combined with the fact that wages in excess of the taxable maximum are exempt from payroll taxes—means that millionaire and billionaire earners stop contributing to Social Security early in the year, while the average worker contributes all year long. In 2015, individuals with wage incomes of $1,000,000 stop contributing on February 12; those with higher incomes stop contributing sooner.

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