◼ FINANCE BloombergBusinessweek March 30, 2020calm, with cash in their portfolios that should allow
themtorideoutvolatility.
Despiteitspracticalityandpopularity,Social
Securityhaslongbeenapolitical football. According
to calculations by the system’s trustees last year, the
program’s income and reserves won’t be enough to
pay for scheduled benefits by 2035, forcing the U.S.
to reduce benefits by about 20%, unless changes are
made. The coronavirus pandemic makes those cal-
culations worse, though no one can fathom by how
much right now. There will be fewer workers to sup-
port the pay-as-you-go system through their pay-
roll taxes. Money will be flying out the door faster
than it’s coming in.
Yet now, with every sector of the economy cry-
ing out for help, some are making the case for
more generous benefits. On March 21, Democratic
Senators Elizabeth Warren, Chuck Schumer, and Ron
Wyden proposed increasing Social Security checks
by $200 a month over the next two years, as part
of the stimulus to combat the fallout from the pan-
demic. Deficit hawks say such payments wouldn’t
be targeted enough to the people who most need
help now. But even if that idea goes nowhere today,
the conversation has shifted away from fixing Social
Security by making it more austere. The federal bud-
get anxieties of the 2030s, or even 2021, are looking
a long way away.
As things get tighter, many Americans may simply
cancel a big chunk of their retirement. It’s a strategy
that more and more older people had been trying.
In the recovery from the Great Recession, more
Americans worked past 65 than at any point since
the creation of Medicare back in the 1960s. A cou-
ple years of extra work, when you’re still saving and
notdrawinguponsavings,candrasticallylowerthe
riskofrunningoutofmoneylater.SocialSecurity
alsorewardsthosewhowaitwithhigherbenefits.
Butthiscrisiswasperfectlydesignedtothrowa
wrenchintosuchplans.Unemploymentis rising,and
jobsdealingwiththepublicareunsafeforseniors,
whoarelikeliertodieif theycatchthevirus.Now,
babyboomerslikeDominguez,whostruggletofind
work,havelittletofallbackonbeyondSocialSecurity.
Ninetyyearsago,theDepressionwasthecrucible
fora newapproachtooldage,a waythatgenerations
ofworkerscouldshareeconomicriskstocreatethe
possibilityofretirement.Today,asbusinessesfrom
giantcorporationstomomandpoprestaurantsgo
beggingforbailouts,retirees—andthemillionswho
hopetogetthere—maydemandtheirownrescue
package.�BenSteverman,withPaulaDwyer28
THEBOTTOMLINEThepandemichasrevealedweaknessesin
everythingfromtheeconomytohealthcare.Addtheretirement
systemtothatlist.will go up. (See the chart on the previous page
for another illustration of this effect.)
Whataboutthepictureforyoungerpeople,
whoseretirementis yearsordecadesaway?That’s
darkened too. On the upside, if you are very young,
it’s possible that today’s lower equity valuations will
improve your future returns. But that assumes you
are in position to save and invest now. That’s diffi-
cult when millions lose their jobs and businesses see
revenue drop to zero. Instead, many cash-strapped
Americans may be forced to tap into retirement at
the worst possible time.
Even in the best of times, though, many workers
with 401(k)s would have struggled to save enough.
Last year, Munnell’s Center for Retirement Research
calculated what would happen if workers eligible for
401(k)s boosted their contributions by 5 percentage
points. Although that would require a heroic effort
by many working- and middle-class Americans—a
boost in their savings rates of 50%—it barely moves
the needle. The share of working-age households at
risk of falling short in retirement barely dropped at
all, from 50.2% to 47.1%.
Most people can’t save enough individually to pro-
tect themselves from bad luck, whether that’s a job
loss or a global financial collapse. “The 401(k)-based
system is woefully inadequate for protecting workers
from these sorts of shocks,” says Nari Rhee, director
of the Retirement Security Program at the University
ofCaliforniaat Berkeley’sCenterforLaborResearch
& Education.“Noindividualcandoit alone.”
Evenbeforethecrisis,expertsandpolicymakers
were starting to rethink the 401(k)-based system
by going back to old ways of sharing the risks of
retirement. One idea—bedeviled by legal barriers,
redtape,andcostconcerns—istomakethe401(k)
lookandfeelmorelikea traditionalpension,using
annuity-like insurance products that guarantee
income for life. Another is to shore up Americans’
retirement security by bolstering Social Security.
“Savings are important for short-term needs,”
says Nancy Altman, a former pension lawyer who
co-founded the advocacy group Social Security
Works in 2010. “But what you need for retirement
is insurance, and that’s what Social Security pro-
vides.” About half of retirees rely on Social Security
for most of their income.
Even wealthy Americans love their Social Security,
especially at times like this. Its value became clear
to Milo Benningfield, a San Francisco financial
adviser, as markets crashed in 2008. “It offered all
kinds of benefits, both financial and psychological,”
he says. “It’s the only real asset in the plan that’s
guaranteed income for life—if all else fails.” For now,
Benningfield says his retired clients are relatively● Monthly Social
Security increase
proposed by
Democrats as part
of the stimulus plan$200