Almost all workers participate in Social Security by making payroll tax contributions, and almost all elderly Americans receive Social Security benefits. In fact, 97 percent of the elderly (aged 60 to 89) either receive Social Security or will receive it.
Social Security is financed through a dedicated payroll tax, paid by employees and employers alike. Payroll taxes account for 89% of Social Security’s revenue. Policies to temporarily defer and/or permanently repeal the payroll tax will put Social Security in jeopardy. Executive action was taken in August to temporarily defer payroll taxes which funds Social Security and Medicare. If a permanent payroll tax cut were put in place, it could deplete the Social Security Trust fund by mid-2023.
Without Social Security benefits, about 4 in 10 Americans aged 65 and older would have incomes below the poverty line, all else being equal, according to official estimates based on the 2018 Current Population Survey. Social Security benefits lift more than 15 million elderly Americans out of poverty.
Medicare plays a key role in providing health and financial security to 60 million older people. Like Social Security, Medicare is a social safety net program that Americans pay into during their working years through taxes. The program helps to pay for many medical services, including hospitalizations, physician visits, prescription drugs and preventive services.
Medicaid provides health care coverage to 7.2 million seniors. Medicaid is the principal source of long-term care coverage for seniors covering nursing home care and other long-term services and supports, as well as other medical care and supportive services that Medicare doesn’t cover. It also covers premiums, deductibles, and cost-sharing for Medicare beneficiaries.
Another avenue for retirement security is defined benefit plans. Several of these plans were first established by UAW members. Unfortunately, in recent decades many employers have stopped offering defined benefits, consequently workers have had to face uncertainty over whether their benefits could be cut after decades of contributing their hard-earned investments. The House passed the Butch Lewis Act (H.R. 397) to strengthen multi-employer pension plans, which cover millions of union retirees. The UAW endorsed the Butch Lewis Act aimed at helping multi-employer plans that are in danger of going insolvent by establishing a federal loan program to protect the retirement income security of over 1 million workers, retirees and pension beneficiaries across the country. However, the Senate must vote on it before it can be signed into law.
According to a recent survey, one in five adults have nothing saved for retirement or emergencies. The COVID 19 downturn threatens to further undermine American’s vulnerable retirement systems. According to the Center for Retirement Research at Boston College, half of all working adults were not saving enough for retirement even when unemployment was low, now that unemployment is so widespread, that number is closer to 55%.
