Editor’s note: This article first appeared in Human Capital, a newsletter by Washington Bureau Chief Melanie Waddell about the people who shape the financial regulatory space.
Welcome back to Human Capital, where we spotlight the movers and shakers influencing policies and regulations in the financial services realm.
I’m Melanie Waddell in Washington. This week, I followed famed advisor Ric Edelman as he ventured to Capitol Hill to raise the alarm — once again — on the urgent need for lawmakers to address the looming retirement income crisis that’s scheduled to hit in 14 years.
(Related: 20 Worst US Cities for Retirement: 2018)
“We need to recognize the incredible challenge we are facing as a country with Social Security and Medicare,” he said during the Wednesday Capitol Hill event dubbed “Planning for 75 at 25: Saving for Retirement and How Policy Affects You,” held by the Funding Our Future Coalition, which was launched by Edelman and the Bipartisan Policy Center in February.
Along with founding Edelman Financial Services — which manages $21 billion-plus in assets for more than 36,000 clients nationwide — hosting TV and radio shows as well as penning numerous books, Edelman is a vocal participant in pushing lawmakers to take action.
Edelman told me that the Funding Our Future Coalition is “developing massive grass-roots programs,” with the Wednesday event being the first. “We have chosen to focus our efforts on consumer awareness.”
The “bluntness” of the current retirement income crisis: Under current law — “and many members of Congress don’t realize this because they weren’t in office in 1983 when the law was last changed” — starting in 2034 (some say 2032, he added), current Social Security retirement benefits will be cut 23% across the board.
“If Congress takes no action, the current law mandates a 23% cut in benefits for all retirees equally,” Edelman warned attendees at the event.
The outcome? “An economic crisis for millions of retirees of unprecedented proportion.”
Why? Because more than half of today’s retirees receive more than half of their incomes from Social Security.
With a 23% benefit cut, the average Social Security check of $1,200 per month will be “cut down to about $900 per month,” Edelman grimaced, which “will cause millions of people to lose their homes, they’ll be unable to buy medicine, and just imagine the economic impact on this country.”
What Congress will do: initiate “massive tax increases to come up with the cash to prevent that [cut] from happening,” which will create “a massive problem for everyone younger and still in the workforce.”
Said Edelman in a separate note to me: “Until everyday Americans understand the issue — that Social Security retirement benefits will be cut 23% across the board starting in 14 years (maybe sooner) — Congress will have no political incentive to fix the problem.”
“We need to get this fixed. We need to do it really, really fast because the longer we wait the more difficult it becomes to fix.”
Edelman’s plan to supplement Social Security, the Tomorrow’s Retirement for the U.S. Today Fund for America (T.R.U.S.T. Fund for America), which he announced last April, “caught the attention of BPC” and inspired the launch of the Funding Our Future Coalition.
“Dozens of organizations have now joined us and more join every week,” he relayed to me, including “leading companies in the financial services field” such as TD Ameritrade, Charles Schwab, Orion, Loring Ward, TIAA, “and we’re hoping more join us.”
— Check out 20 Best US Cities for Retirement: 2018 on ThinkAdvisor.