This is the ninth and final installment in a series of posts that discusses how possible changes in Social Security will affect the residents of Champaign-Urbana, Illinois. The entire series is archived here.
Twenty-eight year old Nick Quealy-Gainer is the sort of person who will be affected by the Social Security cuts suggested by the president’s deficit commission and likely to resurface in the president’s state-of-the-union message come January. The commission recommended raising the retirement age to sixty-eight in about 2050, when Quealy-Gainer will be sixty-eight.
The age for collecting early benefits, too, would be raised to sixty-four, with the possibility of people applying for hardship exemptions to get their money earlier. The Social Security Administration projects that Quealy-Gainer’s benefit at age sixty-seven, his normal retirement age now for full benefits, would be $1507. Under the commission’s proposals, the purchasing power of that benefit will also go down because of changes in the way cost-of-living adjustments would be calculated. That means if Social Security becomes his only source of retirement income, it will buy less than a similar benefit buys today. Between the proposed cuts in Social Security, the lack of an employer-provided pension, and the prospect of little savings (at least for now), Quealy-Gainer also represents the kind of person who could face a big shortfall in retirement income—if he continues in his current profession.
Quealy-Gainer has a master’s degree in social work, and he likes what he does. He works forty hours a week for three organizations—one that raises money for nonprofits, one that works with families who have children with disabilities, and one that does community organizing around the issue of independence for people with disabilities. Those jobs will give him an income of about $40,000 for 2010.
“Social work is one of the lowest professional careers in terms of income,” Quealy-Gainer told me. “Starting salaries are about $30,000, but you can get $60,000 or $70,000 in an administrative position. We’re not doing it for the money, and that’s true of most human service professionals.” The most he expects to earn is about $50,000.
His wife is a children’s librarian with a master’s degree in library science. When we chatted, she was reviewing children’s books for the University of Illinois library, a job providing health insurance. Quealy-Gainer said that the couple had come to terms that her earning potential would be higher than his. She could earn around $75,000, maybe even $100,000—if she could find a good paying library job, that is. Those are scarce right now; budget cuts have closed public libraries around the state.
When we talked, the family was having trouble getting a mortgage. Lenders said their income came from multiple sources, and they don’t have much for a downpayment. In the last six months, they saved $4000. For the last two semesters, he taught a class, bringing in an extra $300 a month. There’s not much left for savings, especially since they were expecting a baby the month after we talked.
Quealy-Gainer said that the first job he had after he graduated from his master’s program did offer a 403(b) savings plan, but today has only $200 in it. “I couldn’t put too much in,” he said. The nonprofits for which he is likely to work usually have no pension plans. And if they do offer a 401(k) plan, that means he has to dig deep into his budget to find extra money to contribute.
Quealy-Gainer had some opinions about Social Security, and knew a fair amount about the retirement side of the program. “I never thought the whole idea of privatizing it during the Bush administration was a good idea,” he told me. “That depends on the private market to support the system and takes taxpayers out of it. It realizes you have to have the ability to save money, and a lot of middle income families don’t have the ability to save or put money in 401(k)s . All of their income goes to daily living.”
He was ambivalent about raising the retirement age. “I’d be more opposed to privatizing than raising the age,” he said. He didn’t think that had as much effect on him. Quealy-Gainer saw the point that people were not working as much in back-breaking factory jobs as they once were, and maybe that justified an increase in the age for full benefits. He also understood why people have to keep working. “I’d love to retire early. Doing the work I do now and not being able to retire early is a daunting thought,” he said, adding that his parents would like to retire early too, but they cannot. His father, a stockbroker, lost his business, and the family has had to live on their 401(k) savings, which means they have to keep working to receive their full benefits. So Quealy-Gainer understood the importance of Social Security.
However, he didn’t know about disability and survivors’ benefits, which could be important to him as a young father. He asked me whether he should buy life insurance when his baby was born. Yes, I replied, and that began a discussion of Social Security survivors’ benefits, which should be factored into the amount of insurance he needed to buy. His annual statement from Social Security advised that he had earned enough credits to qualify for both disability and survivors’ benefits.
If he became disabled right now, his family would receive $898 a month. If he were to die, his son would receive $1013 a month—that’s $12,000 a year his family could count on. Life insurance would make up the rest of the lost income. “This is the first I’ve heard of this,” he said. As I have written before, Social Security is widely popular but not well understood.
For more from Trudy Lieberman on Social Security and entitlement reform, click here.