If elected, Democratic presidential candidate Mike Bloomberg says he plans to create a public 401k option and increase Social Security payouts.
The billionaire and former New York mayor unveiled his plan for shoring up retirement and Social Security on Sunday as part of his broader labor agenda, formally addressing these key retirement issues for the first time as a contender for the Democratic nomination.
Bloomberg’s Retirement Security Policy “will strengthen entitlement programs and supplement the private retirement savings system to ensure that no American senior has to live in the shadow of financial peril,” according to a statement on Bloomberg’s official campaign website.
Back in November, fellow Democratic presidential nominee contender Pete Buttigieg proposed a government-run public 401k option that would be attached to Social Security as part of his “Dignity and Security in Retirement” plan.
Bloomberg says he would create his public-option retirement savings plan with automatic employer and employee contributions for all income earners who do not participate in a defined contribution or benefit plan at work.
His plan would provide a government match for lower-income workers, paid for by a reduction in the tax break for high-income retirement-plan contributions. Per his statement, the plan will also:
- Automatically invest savings in an appropriate target-date fund and provide savers with prudent alternatives, modeled on the Thrift Savings Plan for government workers.
- Automatically enroll savers in a low-cost, inflation-indexed annuity at retirement age.
- Allow (and encourage) savers to consolidate all of their retirement savings into one public 401k account.
- Designate a small part of the accounts as an emergency fund, which savers can tap without penalty to meet short-term needs.
Bloomberg’s campaign didn’t release much detail about how he’d pay for his ideas or where the government money going into the public 401k option would come from, beyond mentioning the reduction in the tax break for high-income retirement plan contributions would defray the costs.
In outlining the need for reform, Bloomberg’s plan says about two-fifths of U.S. workers—more than 50 million people—have no access to a retirement savings plan such as a 401k, and those who do often either don’t contribute or lose money to high fees and bad decisions.
“An estimated half of all workers risk falling short of the money they’ll need to retire comfortably. The added burden on welfare programs such as Medicaid, food stamps and Supplemental Security Income threatens to overwhelm state budgets across the country. And most of the benefits of tax breaks for retirement savings go to wealthier savers. Mike will better prepare American workers for retirement and direct federal subsidies to those who need them most,” the plan reads.
With regard to Social Security, Bloomberg said he would explore ways to put the system on sound financial footing for the long term, but didn’t provide much in the way of specifics.
Per his website, Bloomberg’s plan calls for:
- Introducing a more effective minimum benefit to prevent low-income seniors from falling into poverty. A means-tested minimum benefit called Supplemental Security Income (SSI) that currently operates alongside Social Security is ineffective. Eligibility is complicated and take-up is low. Even when it’s paid, it can leave retirees who have a history of low-wage employment below the poverty line. Mike will implement a new minimum benefit that would help roughly 10% of current recipients.
- Raise future benefits by adjusting cost-of-living allowances to account for higher inflation for seniors. The elderly’s living costs—especially for health care—tend to rise faster than overall inflation. Mike will adjust the COLA to take account of this.
- Examine options for addressing other weaknesses in the benefits system. Social Security benefits fall short in other ways. Family caregivers have lower wages and therefore get smaller benefits. Also, surviving spouses may lose 50% of household income without a commensurate drop in living costs. Mike will examine other options for addressing these issues, as part of a broader reform to preserve and strengthen Social Security.
And finally…
Among the other ideas in Bloomberg’s plan, he mentions restoring the Labor Department’s fiduciary duty rule, requiring brokers and insurance agents to put their clients’ interests first. “Mike will protect elderly investors from conflicted financial advice and improve the financial position of retirees,” the plan says.
For the record, Bloomberg’s namesake company’s 401k plan (Bloomberg L.P. 401k Plan) has a BrightScope Rating of 86. The plan is in the top 15% of plans for Account Balances, Company Generosity, Salary Deferral, and Total Plan Cost. Bloomberg L.P. 401k Plan currently has over 15,200 active participants and over $2.4 billion in plan assets.
“I started out in an entry-level job, and in building my business, I have always believed that our company’s most valuable asset is our 20,000 employees—and that’s why we are committed to providing good pay and the best benefits money can buy,” Bloomberg says in his plan to protect and empower the American workforce of the 21st century. “Donald Trump inherited his wealth and does nothing but pay lip service to the working people who drive America.”
SEE ALSO:
- Dem Hopefuls Talk Pension Reform, Retirement Security to Teamsters
- Mayor Pete Proposes Public 401k Option
- Heated Exchange Highlights Sanders’ 401k Stance
- Bernie Bashes Biden on Social Security Benefits Reform
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.