Financial Security

+Health & Wellness

Financial Security

Over the last half-century dramatic changes have taken place in how Americans support themselves in retirement. Reforms are needed in the public employee retirement system, private sector retirement programs and Social Security. CALSAL supports reforming each of these retirement systems to protect the interests of both current and future retirees.

Private Sector Employer-Sponsored Retirement Programs

For decades the trend has been for private employers (especially small and mid-sized employers) to shift from defined-benefit programs to defined-contribution programs, (primarily 401(k) plans.) Defined benefit pension plans promise to pay a specified monthly benefit at retirement, commonly based on a combination of both salary and years on the job. Defined contribution plans contribute a specified amount to an individual account, most commonly based on salary and other company provided benefits. Further, California has one of the lowest employee participation rates in an employer-based retirement plans. CALSAL supports policies which encourages participation in employer-sponsored retiree-benefit plans and encourages the development of such programs among employers.

Public Retirement Systems

Daily headlines reflect the reality that public sector pension obligations far outpace the capacity of government at every level – city, county and state – to keep up. Reforms must be made to bring future public pension obligations in line with future public revenues and balancing retirement income responsibilities between public employees and the taxpayers.

Social Security

Social Security is almost entirely responsible for lowering the proportion of retirees living in poverty from 35 percent in 1960 to 9 percent today. When Social Security was enacted in 1935, life expectancy was 61 and benefits weren’t payable until age 65. Currently, Social Security benefits are payable at age 62 and life expectancy is 78. Social Security will begin running a deficit in less than 15 years — that is, it will begin to spend more money on benefits than it brings in by taxes. Reforms must be made to protect benefits for current, and future beneficiaries and make the system both financially secure.

Proposed reforms fall into three categories – raise taxes, reduce benefits, or invest privately. CALSAL supports policies that protect benefits for current retirees and those nearing retirement. Reform is necessary, but it must not reduce the benefits of current retirees and should provide an adequate minimum retirement income.

A combination of increased taxes (such as increasing the cap, raising taxes on benefits) and reduced benefits (such as increasing the retirement age and progressive indexing) is needed to restore balance between public expenditure and protection from poverty in old age.

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