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Your ability to enjoy a secure pension may already have been a risky proposition for the Covid-19 crisis. Today, you could face an even steeper battle thanks to the crisis.
Before the lockon of the coronavirus and the resulting mass unemployment, about half of working family members between the ages of 30 and 59 risked a lower standard of living in retirement, according to the Center for Retirement Research at Boston College. In July, that estimate went up to 55%, and it is even higher among older Americans who are closer to their golden years.
Given these stark realities, Joe Biden’s retirement proposals are among his core campaign issues. Here’s how a potential Biden administration can affect retirement for all Americans.
Joe Biden’s Retirement Policy Facilities
- Increase benefits of Social Security, especially for lower-income Americans, and pay for it by raising taxes on those earning more than $ 400,000.
- Drop the age of Medicare application to 60 and try to lower prescription prices.
- Offer a $ 5,000 tax credit to caregivers looking for their spouses as parents.
America’s Retirement Savings Crisis
You’ll probably live longer than you think: About two-thirds of pre-retirement American men underestimate how many years the average 65-year-old man is left, according to the Stanford Center on Longevity, while half of women make the same mistake . (Skeptical readers can use this handy John Hancock calculation for life expectancy to see how many more years actuaries give them.)
While a long life beats the alternative, it also increases your chances of surviving your retirement savings. Of course, this is only possible if you have saved something: According to the Federal Reserve, about a quarter of American workers have not socked for retirement.
And Americans who have retirement savings have to deal with an environment where low-risk investments such as savings accounts, government debt and even some corporate bonds do not have much. As a result, they take more risk in terms of returns, says Mark Travis, CEO of Intrepid Capital.
“A lot of savers have shoved into stocks to earn better returns,” Travis says.
Biden’s policies are unlikely to change these realities. There’s not much chance he’s interested Federal Reserve officials increase rates, especially in a low-growth environment. That low rates are likely to stay here.
Biden would Bolster Social Security
Nearly half of older Americans rely on Social Security for 50% of their monthly income. The core of Biden’s retirement proposals would be to strengthen Social Security with larger payouts and new taxes.
You can start at age 62 with Social Security benefits – and not surprisingly, given the inadequate retirement savings of so many Americans, this also happens to be the most common age to start receiving benefits. Start paying this early, however, accepting a reduction in monthly payments.
Biden has specifically promised to help repair this by increasing benefits for older seniors, for whom Social Security benefits have not kept pace with costs. Under the Biden plan, seniors between the ages of 78 and 82 would gradually increase in their annual benefits.
In addition, Biden’s plan includes the minimum amount that a 30-year retirement pension can provide up to 125% of the poverty line, a major benefit for the lowest-income Americans. He would also increase the amounts and widows would collect by about 20%.
Currently, the Social Security-funded payment tax changes only on your first $ 137,700 in income. To offset the additional costs of its policy proposals, Biden would file a new 12.4% split tax between employers and employees on incomes above $ 400,000 (there would still be no Social Security tax on incomes between $ 137,700 and $ 400,000 ).
Bidding would strengthen the reinforcement to address health care costs
The average American couple retiring at age 65, according to Fidelity, will spend nearly $ 300,000 on health care – and that figure does not include the cost of long-term care. While you should expect a high price tag for health care, you never know when big bills will come up.
After all, these costs could come at any moment, even earlier in retirement. Medicare does not step in until the age of 65, allowing younger retirees to rely on their state’s exchange plans, which often have high deductibles.
And even if you are insured by Medicare, you will still be on the hook for expenses. Steve Feinschreiber, a senior vice president at Fidelity, estimates that 15% of a retiree’s total annual expenses include health care costs, such as premiums and prescription medications. Moreover, almost half of the people who are up to 65 pay for some long-term care.
To address these shortcomings, Biden plans to lower the age of enrollment for Medicare to 60, which will reduce the burden of finding individual insurance policies. He also promised to lower drug prices by allowing Medicare to negotiate with pharmaceutical companies, limiting the rate at which drug prices could rise and Americans could buy cheaper drugs from abroad.
Biden would offer more assistance to family caregivers
Retirement means more than just looking after your own health. Many Americans also have to care for elderly family members, adding additional burdens and costs to caregivers.
A majority of men and a third of women who quit work for 62 said “that health limits their ability to work,” according to a 2017 NIH study Growing Older in America: the Health and Retirement Study . ” This suggests that many Americans may need to scale up their careers or incur additional costs to care for themselves, a sick couple, or an elderly parent.
A separate Harvard Business School report contacted 301 HR departments and spoke to 1,500 employees who provided unpaid care, as planned, and found that 32% volunteered to take care of an elderly family member with daily needs, and a quarter did so to search for a sick or disabled couple, partner or family member.
Those over 50 and caring for a family member lose roughly $ 300,000 in benefits and benefits, according to the AARP.
To address these issues, Biden is supporting a $ 5,000 tax credit for informal caregivers, such as family members and loved ones, as well as credits for Social Security. It is comparable to the Credit for Caring Act of 2019 which would give caregivers a tax credit worth 30% of expenses above $ 2,000. (That bill limits the credit to $ 3,000.) A health care practitioner should verify that you are actually providing care to meet specific mental and physical needs, and that you should receive some of your expenses.
Biden’s plan also enables caregivers who have been away from paid work for at least a year to provide for family members to make so-called care contributions to their retirement plans. Currently, only those 50 or older can do this.
The definitive word
While presidents can have a minimal impact on stock market performance, their policies, once implemented, can drastically improve the safety and security of your retirement. Biden’s proposed Social Security and Medicare reforms, as well as its desire to extend additional assistance to caregivers, could provide millions of Americans with a better, safer retirement.
