A simple, unified vision to bring us together.

Retirement Security For All

Retirement with dignity and security.

Free from worry.

Pitchforks Are Out… For Us!

“Their pensions are too good.

I don’t get that!”

“I’m going to get a modest

benefit! Why attack

me?”

How do we realize our vision?• Make sure all Americans can retire free from worry.

• Build broad political support for secure and adequate solutions to the retirement income crisis in America.

• Raise expectations and create a demand for the right to retirement security.

• Build activity at the state level to achieve national solutions.

A New Coalition for Change• Led by AFSCME and SEIU.

• More than 40 additional organizations.

• Concerned that millions of U.S. workers will lack the financial means to retire.

• Fighting constant attacks on Social Security and Medicare.

• Seeing trends against traditional pensions in both private and public sectors.

Most people don’t have what they need to retire and it’s only getting worse.

Share of households at risk of not being able to maintain living standards in retirement.

blah

Percent of Retiree Income from Social Security

0%10%20%30%40%50%60%70%80%90%

100%

Top 25% of IncomeMiddle 50% of IncomeBottom 25% of Income

Most Retirees Depend on Social Securityfor Big Percentage of Income

Source: Munnell, Webb, and Golub-Sass. “The National Retirement Risk Index: An Update.” October 2012. Center for Retirement Research at Boston College

Income Sources in Retirement

Retirement Savings Not Broad or Deep EnoughPercent of families with retirement accounts, by age of head of household.

48%50%52%54%56%58%60%62%

35-4445-5455-64

Median value of those retirement accounts, by age of head of household.

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

35-4445-5455-64

Source: Bricker, et. al.Federal Reserve Board oGovernors, 2010 SCF

When all households are included, the median retirement account balance is $3,000 for all working-age households and $12,000 for near-retirement households.

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

0%

10%

20%

30%

40%

50%

60%

DBDC Only

31%

45%

Source: EBRI

14%

Private Retirement Plan Coverage, 1979-2010

Fewer Traditional Pension Plans

Finally Recognizing Looming 401(k) Disaster

“Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts.” -- “Our Ridiculous Approach to Retirement,” NYT

Finally Recognizing Looming 401(k) Disaster

“A 2008 Annual Survey of 401(k) Plan Sponsors by Deloitte Consulting found that 80% of employers believe that 401(k)s are effective in recruiting employees to come work for them but only 13% believe that the 401(k) plans they offer will provide retirement security for their workers.”

-- Secrets of the 401(k) Industry

401(k)s: What’s “My Number”Even if you’ve saved properly, 401(k)s require workers to determine:• What investment returns they’ll get in retirement• How long they will live• How much to withdraw each year• What inflation will be like in retirement

An Impossible Task: The best actuaries, economists and investors can’t project these in the short run.

Solution to the retirement security crisis starts with:

1. Strengthening and expanding Social Security, followed by…

2. An additional retirement vehicle for workers.

Social Security:America’s #1 Poverty Fighter

Poverty Rates With and Without Social Security

Women Men

Age With Social Security Without Social Security With Social Security Without Social

Security

62-64 9.9% 24.2% 8.9% 18.9%

65-74 9.8% 43.1% 6.2% 34.9%

75+ 11.6% 57.6% 7.1% 48.1%

Source: Authors’ calculations based on 2000 and 2010 Current Population Survey Annual Social and Economic (ASEC) Supplement Survey (King, et al. 2010). Earnings and income data are for calendar years 1999 and 2009. Chart, courtesy of the Institute for Women’s Policy Research.

14

Social Security: Improve Benefits Now!

• Great success – benefits paid monthly for over 70 yrs.

• More than ½ of retirement income for 70% in U.S.

• Modest benefits: Average $15,000 a year for a worker.

• Why not build on success by improving benefits and ensuring long-range solvency for the Trust Funds?

• Many in Congress agree.

New Bills in 113th CongressThese new bills enhance benefits and Social Security’s long-range finances:

• Strengthening Social Security Act (S.567/H.R.3118): Harkin/Sanchez bill• Boost benefits by $70 a month • Change COLA formula to reflect seniors’ costs (e.g., health care)• “Scrap the cap” on wages.

• Protecting and Preserving Social Security Act (S.308/H.R.649): Begich/Deutch• Switch the COLA formula to the fairer CPI-E• Gradually raise cap on payroll contributions.

• Keeping Our Social Security Promises Act (S.500)/No Loopholes in Social

Security Taxes Act (H.R. 1029): Sanders/DeFazio • Raise the wage cap from $117,000 to $250,000 • Gradually increase cap until all earnings are covered.

cont.: New Bills in 113th Congress

• Social Security Enhancement and Protection Act (H.R.1374): Moore • Provide 5 years of work credits for family caregivers• Boost benefits by 5 percent for the very old • Restore survivor benefits for college students • Scrap the wage cap • Gradually increase payroll contributions.

• Retirement and Income Security Enhancements (RAISE) Act (S.2455): Begich/ Murray

• Enhance benefits for divorced spouses and widows • Extend benefits for survivor children to age 23 • Raise the wage cap.

The discussion is just beginning. As Boomers retire, political support will grow.

Additional Vehicle for Retirement Income:

The States’ Role

Key Policy Issues: Design Decisions

DB/DC Fights Inform Us!

DB Plans get: More Bang-for-the-Buck Life Annuity Pool investment risk Pool mortality risk

401k/DC plans fall short: Poor investment returns/high fees Early Withdraws/leakage problems

(~3%/yr) Are a failed experiment: $6.6 trillion

deficit

Question: Who Should be Covered?

Combine features of Social Security & traditional pensions.

Target benefits to equal half of initial Social Security benefits for most workers. – Benefit formula: .75 percent X years of service X

Average Indexed Monthly Earnings– Approximately $8000 annual benefit today– Full Retirement at 65

Target cost: 4% of payroll (add’l features add to cost)

A Role for the States:Supplemental Social Security

Advantages of Social Security Supplement

Can accept employer money

Longevity risk borne by plan

Portable in-state

Investment risk borne by plan

ERISA and other federal regulations don’t apply

Robust benefit

Universal

No “leakage”

The Road to Retirement Security:State Actions, to date…Legislature passed plan: CA, MALegislature passed study: CT, OR, MN, VTExec. Order/Task Force: MDf of initial Social

State initiatives must add up to

a national demand for Congress to act.

Retirement Security for All

For More Information…

Contact:

Karen Gilgoff, Assistant DirectorAFSCME Retirees Department

Dan Doonan, Labor EconomistDepartment of Research and Collective Bargaining Services

American Federation of State County and Municipal Employees, AFL-CIO

1625 L Street NW Washington, DC 20036

202-429-1000