On February 16, Democratic presidential candidate Mike Bloomberg released a plan to shore up retirement on a national level. The plan is rooted in the idea that seniors shouldn't have to live out their golden years grappling with financial distress. Here are some highlights that retirees will benefit from should this plan come to fruition.
1. A new minimum Social Security benefit and stronger cost-of-living adjustments
Many seniors are forced to live solely on Social Security, and those who do tend to struggle financially. Bloomberg plans to implement a new minimum benefit that would result in a substantial income boost for a good 10% of recipients today. Bloomberg also plans to change the way cost-of-living adjustments are calculated so that seniors are able to retain more buying power in the face of inflation. Currently, benefits are doing a poor job of keeping up with rising costs, particularly healthcare costs.
2. A government-backed retirement savings plan
Workers who want to save for retirement today are limited to either a 401(k) through their employers or an IRA. In both accounts, individual savers take on the risk associated with investing their nest eggs, and also lose money to costly fees that eat away at their returns.
Bloomberg plans to create a public-option retirement savings plan with automatic employer and employee contributions for workers who do not participate in a retirement plan or have a pension through work. This new savings plan will include a government match for low-income workers (similar to the employer match workers often receive in a 401(k) plan). The plan will also automatically invest savings in suitable target-date funds and automatically enroll savers in low-cost, inflation-indexed annuities at retirement age. And workers who participate in this savings plan will have the option to access a small portion of their funds for near-term emergency expenses without penalty -- an option that generally doesn't exist with IRAs or 401(k)s.
3. Lower costs and expanded coverage under Medicare
Currently, Medicare beneficiaries have no limit on out-of-pocket spending for medications. Bloomberg plans to implement a cap on those costs to the tune of $2,000 a year. He also intends to expand Medicare to cover services like dental care, hearing aids, and vision exams -- services the program won't pay for at present.
4. Affordable long-term care options
The current average costs associated with long-term care can be downright catastrophic. Bloomberg will work with states to develop new programs that provide support services to seniors needing long-term care at home to help minimize their costs while allowing them to age with dignity.
5. Protection against reverse mortgages
For many seniors, home equity is the only means of getting access to money when they need it. The result? They sign up for reverse mortgages, which are notorious for high fees, complex rules, and the predatory salespeople who push them. Bloomberg plans to develop products that work similarly to the reverse mortgage, but are much more financially friendly for seniors. He also intends to provide more advisory services to improve financial literacy among seniors and spare them from making bad choices. And he plans to promote state programs that allow low-income seniors to defer property taxes, leaving them with more income to pay their bills.
It's too soon to know how the upcoming election will pan out and whether Bloomberg's ideas will become reality. But for now, seniors may be interested to know his plans for their fiscal health.