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Before the year ends, the presidentâs fiscal commission will bring forth a plan for cutting the deficit. While commission co-chairs Alan Simpson and Erskine Bowles have announced that everything that costs the government money is on the tableâwars, hunger programs, agricultural price supports, entitlements like Social Security and Medicare, and thousands of other programsâonly Social Security has risen to the top. Thatâs largely because of the public relations machine created by billionaire investment banker Peter G. Peterson and a mainstream news media that have paid scant attention to Social Security. (Peterson is a CJR funder.) If anything, Petersonâs message has gotten through. A Gallup poll found that more than half of current retirees expect their benefits to be cut, and sixty percent of all Americans believe that Social Security wonât be able to pay benefits when they stop working.
The stories and columns that have appeared border on the wonkish and elliptical, and have failed to tell ordinary Americans whatâs at stake. What does all this talk mean for them? CJR went to Americaâs Heartlandâthe metropolitan area of Champaign-Urbana, Illinoisâto find out. This is the first of a series of posts that discuss how possible changes in Social Security will affect the areaâs residents. The entire series is archived here.
Jennifer Tayabji is the kind of person that Alan Simpson likes to talk about. Sheâs young, and fits his conception of some retireeâs grandchild. As the former Wyoming senator likes to say, we have to fix Social Security for our grandchildren. The twenty-nine-year-old Tayabji has heard that kind of talk. âI donât have confidence Social Security will be there when I do retire, especially if they raise the retirement age,â she told me. âA lot of people in the lower income bracket will be alive, but by the time they get to that point, the idealized notion of what retirement is will be gone.â
Tayabji has a lot of work responsibility for someone her age. She is the executive director of the Illinois Disciples Foundation, a local philanthropic organization that makes grants to non-profits in the area. Once a chemistry major in college, she didnât finish her degree because she didnât want to be a chemist. So she got a job as an administrative assistant at the foundation, quickly learned the business of giving away money, and moved up the ranks. She has been the executive director for a year and a half, and now makes $35,000 a year. Each pay period, $80.83 comes out of her check for her Social Security taxes.
Like it does for all workers under the system, the Social Security Administration sends her an annual statement giving an accounting of the amounts she has paid into the system and what her benefits are likely to be given her current income at this point in her career. If she were to retire at age sixty-seven, currently the normal retirement age for someone her age, her benefit would be $1358 per month, about the average benefit someone retiring today at age sixty-five now receives. At age sixty-two it would be $956, and at age seventy, with delayed retirement credits which are available to workers who postpone taking their benefits, sheâd get $1684.
Of course, if Tayabjiâs income rises substantially, those benefits would also increase, since the more someone earns, the larger the benefit. The problem is, as Tayabji sees it, her income wonât go up that much more. Her partner just started a business, so she wants to stay in the Champaign-Urbana area and continue to work for a non-profit with a mission to improve health care and mental health services. âThatâs where my strong passion is,â she says. Sheâs not sure she will finish her degree, and thinks that her income potential is somewhat limited. â$45,000 or $50,000 is realistic,â she says. âA lot depends on the economy. I had a different outlook three or four years ago. I was younger and had more hope. I thought then it wouldnât be hard to get his great job that pays all your expenses, and now Iâll be happy to have a job.â
Her number one financial worry isnât far-off retirement; itâs finding the down payment to buy a house with her partner. He has no credit history, and hers is hardly stellar. Tayabji said she used a lot of credit to live on and had medical debts. Paying off her creditors is also a primary concern, and any spare cash goes toward that goal. That means she doesnât have enough to save in a pension plan like an IRA or a 401(k). Tayabji said that she did start a Roth IRA but was forced to close it because she didnât have the money to maintain it. The minimum monthly contribution was $50, but she said that was âpushing it.â The $50 was going toward credit payments, so she closed out the $75 she had been able to save over eight or nine months. She wonât set up another IRA until her debts are cleared.
Thereâs no pension or 401(k) plan where she currently works, but she knows that some of the larger non-profits in the area do have pension plans which she could contribute to later on if she ends up working for one of them. So unless her employment prospects bring a much higher salary and a pension, her only retirement income will be Social Security, with whatever the average benefit is when she retires. If the retirement age for her age cohort is pushed to seventy, that translates into a benefit reduction for her.
We talked about what Social Security is and is not, and while Tayabji said she didnât know a lot about it, she said that âitâs definitely important to have,â adding that âin general we donât know where the money we put in goes and what it means down the road.â When I asked her if it was a welfare program, she said âyes and no.â I probed further. âYes, in the sense that itâs there to help us out to provide assistance. No, in the sense that we pay into it. People think that welfare is claiming something they havenât earned.â
I asked her about how she would feel if the retirement age were raised for collecting full Social Security benefits, an option thatâs gaining traction among Washingtonâs economic cognoscenti. Tayabji said it was hard to concretely understand how she would be affected because âIâm wondering what my next job will be.â But then she said âit would definitely be upsetting because there has been no reason explained that justifies raising the age. There has not been much in the media. That blanket statement people are living longer isnât applicable to many groups,â she explained.
âIn regards to the deficit,â she said, âwe need to do something to reduce it, but raising the age of retirement is not the way to do that. It definitely favors the upper classes, not working or lower income people.â
Taybaji apologized for not knowing more about the system. âI feel like I need to know more,â she said. What would help? âHaving a really informative site that has information that was really objective,â she told me.
Who would you trust to provide it? I asked. âCertain media sourcesâmore progressive ones and more investigative journalism,â she replied
I questioned her about conservative sites. âI would want to see multiple sources from different angles and perspectives,â she answered. What about the government? âIâm sure the government has something, but it wouldnât be an objective source,â she said. âTo me thereâs not a lot of transparency in the government.â
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