Mike Bloomberg unveiled on Sunday his presidential campaign’s plans for retirement and Social Security, tackling the subject for the first time as a contender for the Democratic nomination.
In laying out his retirement security plan, the former Republican and New York City mayor’s plan echoed most of his fellow Democrats by promising an increase in Social Security payouts. Yet he also drew distinctions between their proposals and President Donald Trump’s, by introducing a new minimum benefit to ensure that all recipients are at least above the poverty line.
With Social Security projected to run short of funds in the coming years, Bloomberg’s proposal also made mention of “consider [ing] options for preserving and strengthening Social Security’s long-term finances, while maintaining and enhancing benefits for the neediest recipients.”
It also lays out a plan to “supplement” lower-income retirement options by creating a public savings option with automatic contributions for all income earners — similar to what South Bend Mayor Pete Buttigieg and Minnesota Senator Amy Klobuchar have also proposed.
“Americans who have worked for decades deserve the opportunity to retire without facing constant financial pressure,” Bloomberg said in a statement. “As president, I will strengthen Social Security to allow seniors to do just that.”
However, the candidate was vague about how he’d pay for his ideas, especially with some estimates showing the retirement trust fund could become insolvent sometime within the next 20 years. Bloomberg’s rivals have released much greater detail on how they’d fund big-ticket changes, which include taxes on higher salaries and capital gains.
Grabbing ‘the third rail’
Frequently referred to as the “third rail of politics,” Social Security has been a contentious issue in the Democratic primary season, especially as Vermont Senator Bernie Sanders and Vice President Joe Biden vie for frontrunner status.
The subject’s prominence is likely to rise ahead of contests in states like Florida, where large swaths of retirees are expected to cast votes. In an acknowledgment of that voting bloc’s importance, Bloomberg’s campaign tapped 3 Florida politicians to publicly back his plan.
Nearly all of Mayor Bloomberg’s fellow candidates have called for some version of a minimum benefit, including Sanders and Mass. Senator Elizabeth Warren. Both would increase benefits across the board, and Sanders has helped write a bill to expand Social Security.
Mayor Bloomberg’s plan calls for a change in how benefits are calculated by appearing to use the Consumer Price Index for the Elderly (CPI-E). Right now, benefits are calculated based on urban and clerical worker prices, rather than what seniors spend most of their money on — such as prescription drugs and medical care. Historically, the CPI-E has risen faster than other wages, and the proposed changes would likely boost benefit payouts over time.
The former New York Mayor also didn’t release a ton of detail on how where the government money going into the public 401(k) option would come from, beyond saying a reduction in the tax break for high-income retirement plan contributions would defray the costs.
He also wasn’t specific about how the benefit increases would be paid for — or how the coming Social Security deficit would be plugged.
‘This is about simplicity’
Bloomberg’s proposal comes at a time where nearly one in five Americans have nothing saved for retirement, according to a study by financial firm Northwestern Mutual.
His plan for public retirement plans, which aren’t in existence yet, would aim to simplify existing options via a government-run option with a required employer match. Among other offerings, Bloomberg is proposing to supplement the incomes of low-wage workers if they were to work past the age of 65, or take on the role of a caregiver.
Another facet of his retirement plan is encouraging employees to roll over all their retirement accounts into this public 401(k) option.
“This about simplicity, most people would want to go with a simple solution,” said Brandon Renfro, assistant professor of finance at East Baptist University, told Yahoo Finance recently. “You only have one account to deal with it.”
Bloomberg would also enroll savers in a low-cost, inflation-index annuity at retirement age. Annuities are retirement vehicles in which you’d pay a monthly premiums in exchange for regular payout streams in retirement. They hedge against the possibility that your retirement savings may run out.
Another similarity between Buttigieg and Bloomberg is that both want to dedicate a portion of retirement savings towards a workers emergency fund, which savers will tap into for short term needs, without penalty.
Medicare, Medicaid also on the menu
The plan mentions a few other initiatives to help seniors, such as improving the services offered by Medicare and Medicaid, lowering drug costs, and providing government-run insurance for long-term care.
The ideas are mostly nods to Mayor Bloomberg’s previously announced plans to create a Medicare-like public option and lower drug prices. One new wrinkle is an idea of “improve housing security for the elderly by expanding rental assistance” to protect the ability of seniors to live longer at home.
Taking on Trump
The plan never mentions Bloomberg’s Democratic rivals by name but one name appears over and over again: President Donald Trump.
The president has raised questions about his plans for Social Security and Medicare, and in a recent interview stated his administration would tackle entitlement spending “at the right time” — even as he’s accused Democrats of wanting to “destroy” retirement safety.
Democrats are going to destroy your Social Security. I have totally left it alone, as promised, and will save it!— Donald J. Trump (@realDonaldTrump) January 23, 2020
In the unveiling of his plan, Bloomberg blasted Trump for proposing Social Security cuts, “just as he’s broken so many other promises.”
Dhara Singh covers retirement and housing for Yahoo Finance. Ben Werschkul is a producer for Yahoo Finance in Washington, DC. You can follow them on twitter @dsinghx and @benwerschkul.