Obama’s Budget Plan: Not Looking Any Better for Retirees

In light of government departmental budget proposals prepared and announced last week, the retirement outlook for most seniors and those approaching retirement years is none the better. In fact, given the lack of attention to Social Security and recent payroll tax cut extension, the retirement outlook could be even worse, according to the Boston College Center for Retirement Research.

“The President’s budget does not contain any major new proposals that would dramatically affect the retirement income picture,” Alicia Munnell, director of the Center for Retirement Research told RMD in an email. “It does include the Automatic IRA proposal again (as in last year’s budget), which would be a positive step toward expanding retirement savings among workers who currently lack access to a 401(k) plan. However, the failure to address Social Security’s long-term funding shortfall is disappointing. And the extension of the payroll tax cut could potentially make solving the shortfall more difficult because there is often considerable resistance to letting tax cuts expire.”

The need for retirees to rely on their home equity as an income source in retirement is still very much present, in light of the budget’s attention to certain retirement programs.

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“Going forward, many retirees may find that their financial resources are insufficient to maintain their pre-retirement standard of living,” Munnell says. “If so, they should consider tapping their home equity.”

Specifically, the need for changes to Social Security is driving the uncertainty of the situation and lack of confidence for those retiring today, as well as those who will retire in the coming generations.

“Shoring up Social Security would help everyone by restoring confidence in the program and providing greater certainty about future benefit levels,” Munnell says. “With the decline of private sector defined benefit plans and growing longevity and health care costs, younger generations will have a greater need to save on their own for retirement through 401(k)-type plans.”

Munnell’s team at the Center for Retirement Research, which has conducted analysis with the finding that retirees who have reverse mortgages tend to be better off on average in retirement than those who do not, is continuing to look into the benefits of using home equity conversion products.

Written by Elizabeth Ecker

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  • What a sad comment on a Democratic President.  He is no FDR or LBJ.  If he shows no interest in the future of seniors in an election year when will he?

    For the first two years of this Presidency when there was a Democratic Congress, the President created his health care program at the expense of Medicare.  He did not help shore up Social Security and he encouraged self funding of retirement rather than raising the social conscience of employers to provide retirement benefits to their employees.

    When it came to the HECM program, it was true that the program was in trouble at that point but rather than working with the industry for two years this President and the Democratic Congress abandoned the program and forced seniors to suffer lower benefits at higher ongoing MIP cost.  Raising the lending limits for HECMs was not in the original bill that the Democrats created for raising FHA loan limits generally back in 2009 and they made it clear seniors did not deserve the higher $729K limit.  If it had not been for the good people at HUD coming up with the Saver, seniors would have seen another set back to the program last fiscal year.

    Some in the industry remind us to vote our pocketbook and vote for those who do not just talk about helping seniors but actually do it. While it is not clear that the Republicans would do much better, this bunch of Democrats is not helping seniors and seem to ignore the HECM program altogether.

    We need to be reminded how it was the Democrats helped seniors in 2009 and 2010 when they controlled the White House and Congress.  Some of us have forgotten just as it seems they forgot about caring about seniors.

    Mr. President, what are you doing for our senior population and those who will be becoming seniors in this decade and beyond?   

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