RETIREMENT PLANNING IN WISCONSIN
(Joyce Luedke is part of POWRS (Protect our Wisconsin Retirement System.)
Here is my summary of our June 24th POWRS Renewal Meeting with Karen Holden—UW-Madison Professor Emeritus of Public Affairs and Consumer Science.
Karen Holden referred to her research on retirement planning in the following articles.
http://www.ncpssm.org/RetirementSecurity/karen-holden-bio.pdf
http://aging.wisc.edu/research/affil.php?Ident=24
I. Financial literacy education.
A. This is crucial for the populace as a whole, but essential for people who do their own planning. Many people are vulnerable, especially women, when they are on their own. The Labor Department updated the rules and requirements stating financial advisors must put the interests of their clients first. Financial advisors have fiduciary responsibilities to their clients. The objections (by the GOP) to these rules and requirements include the theory that financial advisors will not advise small investors.
B. The role of the Consumer Financial Service Bureau is to protect consumers.
https://www.dol.gov/ebsa/newsroom/fsconflictsofinterest.html
I looked for articles citing that these decisions were over-ruled—I couldn’t find any.
II. Reducing the financial and health consequences of critical life events (e.g., disability, divorce, widowhood, death, job loss).
A. Income inequality is a factor in retirement insecurity. This is especially true for women because of the income gap. Widowed women and older single women and their families are especially vulnerable. More older women are working. Poverty is high for single women with children. Women often fall into poverty after a divorce or death of a spouse. Female workers participate less in Deferred Retirement Systems. How do women view retirement issues?
B. Research needs to be done regarding the underlying causes of inequality and what must be done to address them.
C. Children are affected by older parents who are living in poverty and don’t have the social safety nets in place. The careers of these children are impacted.
D. Immigrants and their families are impacted by retirement insecurity. Some of the children are here legally while their parents/family members are not. Social network services often are not available. A different form of labor market engagement exists for these families. Growing diversity of the population needs to be addressed.
E. Many middle income families aren’t able to save for retirement. Fewer employers are offering retirement plans. 401 (k)s are not as secure as pension systems. This is another reason for financial literacy education.
III. Public policy, through regulation or direct program assistance
A. Retirement systems are jeopardized by market changes. Brexit is a prime example. The New York Stock Exchange dropped over 600 points on that Friday. No one knows what to expect.
B. The importance of Social Security and Medicare in keeping the elderly out of poverty needs to be addressed.
C. Karen Holden said the WRS “is the cleverest retirement system ever created.” “This is what a retirement system should look like.” “It should be the model of all systems.” Employer deferred compensation is there for retirees. The smoothing of the system through the gains and losses keeps the system strong. Sharing the risk is another great feature. WRS does not have a COLA (Cost of Living Adjustment) that other states have—Illinois is an example. It is crucial to fight any changes. The internal management of ETF and SWIB is doing an excellent job. WRS needs to be protected to prohibit politicians or other entities from draining the system. Karen praised the WRS and knows its value to those in the system and the state at large.
D. There must be a balance: individual responsibility; government responsibility; institutional role.
IV. Policies for rural vs urban residents
Karen Holden didn’t research this issue. Obviously, rural residents do not have adequate access to financial advisors and their services.
V. Court cases of cities that go bankrupt—Detroit is an example—and the impact on pension funds.
VI. SB 45 and state mandated retirement systems for the private sector.
https://docs.legis.wisconsin.gov/2015/proposals/sb45
A. One of the issues would be the diversity of private employers. How would this affect small businesses in the state? Other states have passed a retirement system for the private sector.
http://www.retirementsecurityforall.org/document.php?f=small-biz
http://crr.bc.edu/wp-content/uploads/2016/02/IB_16-4-1.pdf
B. What would happen to the system if employers pulled out of the system after it was set up? The demise of one or more employers would affect the system. (I thought this was an excellent observation and insight knowing full well businesses go bankrupt or go out of business.)
C. A mandatory saving system would help the population, especially middle and low income earners. One idea was for the state to match the tax refund if the person puts the tax refund into the savings system. Money cannot be withdrawn until retirement.
D. It would take a generation or more before people in the system would see results.
E. POWRS needs to touch base with Sen. Hansen (He needs to get reelected) and Rep. Genrich regarding SB45.
F. How would expanding Social Security help?
VII. Switching employees from a public pension system to a private system is detrimental to the employees and retirees.
Population needs to be made aware of this.
VIII. Pension Envy
A. Politicians take advantage of this. “They have it and you don’t.”
B. Karen Holden asked, “Why don’t we all have it?” How can this be done?
IX. Statewide Retirement Security for All Conference
Karen will work with POWRS and do what she can to be part of this conference. She gave our POWRS group credit for all that we have been doing.