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Tag: Government pensions and social security

  • Public workers may receive reduced Social Security benefits. There’s growing support in Congress to change that

    Public workers may receive reduced Social Security benefits. There’s growing support in Congress to change that

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    Araya Doheny | Getty Images

    When Dave Bernstein, 87, started working at the U.S. Postal Service in February 1970, he was making $2.35 an hour.

    To supplement his income, he also took on other work. Years later, Bernstein decided in 1992 to take a voluntary retirement.

    “We knew there was going to be a reduced pension because of the early out,” said Phyllis Bernstein, Dave’s wife, who is 84.

    But what came next was something the couple did not expect.

    While Dave was expecting a monthly Social Security check of around $800, it ended up being just about half that amount – around $415 – even though he had earned the required 40 credits to be fully insured by the program. The benefits were adjusted based on rules for workers who earn both pension and Social Security benefits.

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    The couple, who reside in Tampa, Florida, have had a different retirement than they envisioned due to the lower income.

    Phyllis kept working until she was 82. They have also turned to family for financial support.

    Their lifestyle is frugal, with home-cooked meals and cars they kept for 20 years, or “until the wheels were falling off,” the couple jokes.

    But their limited resources have made traveling to Australia and New Zealand – Phyllis’ dream – out of reach.

    “When he retired, I was working,” Phyllis said. “We just couldn’t do the travel.”

    Today, Dave is pushing for the Social Security rules that reduced his benefits to be changed.

    His union, the American Postal Workers Union, has endorsed the Social Security Fairness Act, a bill proposed in Congress that would repeal Social Security rules known as the Windfall Elimination Provision, or WEP, and Government Pension Offset, or GPO, that reduce benefits for workers had positions where they did not pay Social Security taxes, also called non-covered earnings.

    The legislation has support from other organizations that represent public workers, including teachers, firefighters and police.

    The bill has overwhelming bipartisan support in the House of Representatives – 300 co-sponsors – at a time when that chamber has been politically divided. That support recently prompted House lawmakers to send a letter to leaders of the Ways and Means Committee to request a hearing.

    The Social Security Fairness Act has also been introduced in the Senate, with support from 49 leaders from both sides of the aisle.

    Yet some experts say just getting rid of the rules may not be the most effective way of making the system fairer.

    How the WEP, GPO rules work

    The WEP applies to how retirement or disability benefits are calculated if a worker earned a retirement or disability pension from an employer who did not withhold Social Security taxes and qualifies for Social Security from work in other jobs where they did pay taxes into the program.

    Social Security benefits are calculated using a worker’s average indexed monthly earnings, and then using a formula to calculate a worker’s basic benefit amount. For workers affected by the WEP, part of the replacement rate for the average indexed monthly earnings is brought down to 40% from 90%.

    The GPO, meanwhile, reduces benefits for spouses and widows or widowers of recipients of retirement or disability pensions from local, state or federal governments.

    It affects hundreds of thousands, if not millions of public employees that paid into Social Security and essentially are being penalized because they also happen to be public servants.

    Edward Kelly

    general president of the International Association of Fire Fighters

    Under the GPO, Social Security benefits are reduced by two-thirds of the government pension. If two-thirds of the government pension is more than the Social Security benefit, the Social Security benefit may be zero.

    The impact of the rules is far reaching, according to Edward Kelly, general president of the International Association of Fire Fighters. Many firefighters work in second jobs in the private sector as cab drivers, bar tenders or truck drivers, where they earn credits toward Social Security.

    “They steal their money, because they’re also public employees,” said Kelly, who describes his union members as “passionately angry” about the issue.

    “It affects hundreds of thousands, if not millions of public employees that paid into Social Security and essentially are being penalized because they also happen to be public servants, whether they are teachers, cops and, obviously, firefighters,” Kelly said.

    Why experts say another fix may be better

    The WEP and GPO rules were intended to make it so workers who pay Social Security taxes for their entire careers are treated the same as those who do not.

    But under those current rules, some beneficiaries receive lower benefits than they would have if they paid into Social Security for all of their careers, while others receive higher benefits, according to the Bipartisan Policy Center.

    Yet repealing the WEP and GPO rules would result in Social Security benefits that are “overly generous” for non-covered workers, research has found.

    Part of what may create that advantage is that Social Security benefits are progressive, and therefore replace a larger share of income for lower earners. So someone who only has part of their salary history in Social Security may get a higher replacement rate without considering their pension income.

    Fully repealing the WEP and GPO rules may also come with higher costs at a time when the program facing a funding shortfall. The change would add an estimated $150 billion to the program’s costs in the next 10 years, according to the Center on Budget and Policy Priorities.

    Another way of handling the disparity may be to create a proportional approach to income replacement. Instead of the WEP, workers’ benefits would be calculated based on all of their earnings and then adjusted to reflect the share of their careers that were in jobs covered by Social Security. A similar approach may be taken with the GPO.

    Certain bills on Capitol Hill propose a proportional approach.

    However, a proportional formula may not solve all the inequities in the current system, according to Emerson Sprick, senior economic analyst at the Bipartisan Policy Center, which has prompted to think tank to work on refining its proposal.

    ‘Extremely complex’ to understand

    An important advantage to reforming the current formulas would be making it easier for workers to understand and plan for their retirements.

    “It is definitely extremely complex, and very hard for folks preparing for retirement or in retirement, to understand what it means for their benefits,” Sprick said.

    Social Security statements that provide retirement benefit estimates do not take these rules into account.

    Consequently, many workers find out their benefits are adjusted when they are about to retire.

    shapecharge | E+ | Getty Images

    “The young guys don’t pay attention to it because it’s too far out; they’re not worried about it,” Kelly said of the firefighters.

    “It’s not until you’re ready to go out the door that you actually start paying attention to what you’re going to have to live off when you actually retire,” he added.

    The reductions to their Social Security benefits can be a shock.

    For beneficiaries like the Bernsteins who start out with lower benefits, it can be difficult to catch up, even after a record 8.7% Social Security cost-of-living adjustmentw went into effect this year.

    “Gas this summer and in the spring at $4 a gallon ate that money up like it wasn’t even there,” Dave Bernstein said.

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  • Social Security cost-of-living adjustment will be 3.2% in 2024, well below this year’s record-setting increase

    Social Security cost-of-living adjustment will be 3.2% in 2024, well below this year’s record-setting increase

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    Jozef Polc / 500Px | 500Px Plus | Getty Images

    The Social Security Administration has announced a 3.2% cost-of-living adjustment for 2024.

    These benefit adjustments are made annually to help benefits keep place with inflation. Recipients will see the increase reflected in their January checks. 

    The 2024 benefit increase is much lower than record 8.7% cost-of-living adjustment Social Security beneficiaries saw this year, the biggest boost in four decades in response to record high inflation. It is also lower than the 5.9% cost-of-living adjustment for 2022. 

    The 3.2% increase is in line with an estimate released last month by The Senior Citizens League, a nonpartisan senior group.

    This is breaking news. Please check back for updates.

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  • EXPLAINER: Can Ukraine pay for war without wrecking economy?

    EXPLAINER: Can Ukraine pay for war without wrecking economy?

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    FRANKFURT, Germany — Even as Ukraine celebrates recent battlefield victories, its government faces a looming challenge on the financial front: how to pay the enormous cost of the war effort without triggering out-of-control price spikes for ordinary people or piling up debt that could hamper postwar reconstruction.

    The struggle is finding loans or donations to cover a massive budget deficit for next year — and do it without using central bank bailouts that risk wrecking Ukraine’s currency, the hryvnia.

    Economists working with the government say that if Ukraine can shore up its finances through the end of next year, it is Russia that could find itself in financial trouble if a proposed oil price cap by the U.S., European Union and allies saps Moscow’s earnings.

    Here are key facts about Ukraine’s economic battle against Russia:

    HOW HAS UKRAINE BEEN PAYING FOR ITS DEFENSE SO FAR?

    In the first days of Russia’s invasion, the Ukrainian government turned to foreign help that came at irregular intervals. When it didn’t have enough, the central bank bought government bonds using newly printed money. The alternative would have been to stop paying people’s pensions and state salaries.

    Economists say printing money — while a badly needed stop-gap measure at the time — risks letting inflation get out of control and collapsing the value of the country’s currency if it continues.

    Ukraine has painful memories of hyperinflation from the early 1990s, economist Nataliia Shapoval said. As a child, she watched her parents use large bundles of bills for everyday purchases as the currency lost value day by day, before being replaced by today’s hryvnia.

    “Ukraine has been through this, so we know what inflation that is out of control looks like, and we don’t want this again,” said Shapoval, vice president for policy research at the Kyiv School of Economics. “The government and the central bank are already on the slippery slope by printing so much.”

    Price stability and the ability to pay pensions have enormous impact on ordinary people and society at a time when Russia is trying to demoralize the population by knocking out power and water heading into winter.

    With inflation already high at 27%, price hikes have made it hard for lower-income people to afford food.

    Bread that used to cost the equivalent of 50 U.S. cents has doubled, said Halyna Morozova, a resident of Kherson, a recently liberated southern city.

    “It is very depressing, and we are nervous. We were living on old stocks (of food), but now the light is turned off, the refrigerator doesn’t work and we have to throw away the food,” the 80-year-old said recently.

    She said the Russians kept paying her Ukrainian pension in rubles but since they started to withdraw in October, she has received nothing. She’s counting on the government to return any pension money that was lost, she said.

    Tetiana Vainshtein, also in Kherson, says natural gas is too expensive to keep her home heated. “I am cold. I like warmth, and I’m terribly cold,” the 68-year-old said.

    Bank closures during the Russian occupation kept her from getting her pension cash, forcing her to carefully ration every hryvnia for food, she said.

    HOW MUCH SUPPORT DOES UKRAINE NEED?

    President Volodymyr Zelenskyy says Ukraine needs $38 billion in outright aid from Western allies like the U.S and 27-nation EU, plus $17 billion for a reconstruction fund for war damage.

    Economists associated with the Kyiv School of Economics say a lower overall total of $50 billion from donors would be enough to get Ukraine through the year.

    Defense spending is six times higher in the 2023 budget recently passed by the Ukrainian parliament compared to last year. Military and security spending will total 43% of the budget, or an enormous 18.2% of annual economic output.

    The 2.6 trillion hryvnia budget has a yawning 1.3 trillion hryvnia deficit, meaning the government needs to find $3 billion to $5 billion a month to cover the gap. Recent attacks on energy infrastructure since the budget passed will only increase the financing need because repairs can’t wait for postwar reconstruction and will hit this year’s budget.

    HOW COULD FINANCES AFFECT THE OUTCOME OF THE WAR?

    Despite Western sanctions, Russia’s economy has fared better than Ukraine’s because high oil and natural gas prices have bolstered the Kremlin’s budget.

    Plans by the EU and allies in the Group of Seven democracies to place a price cap on Russian oil sales aim to change that.

    The Kyiv school economists say “by the middle of next year, we believe that the economic situation will shift strongly in Ukraine’s favor, making strong partner support particularly important over the period until that point.”

    HOW MUCH FINANCING DOES UKRAINE HAVE ALREADY?

    The U.S. has been the leading donor, giving $15.2 billion in financial assistance and $52 billion in overall aid, including humanitarian and military assistance, through Oct. 3, according to the latest available data compiled by the Ukraine Support Tracker at the Kiel Institute for the World Economy.

    EU institutions and member countries have committed $29.2 billion, though “many of their pledges are arriving in Ukraine with long delays,” said Christoph Trebesch, who heads the tracker team.

    The European Commission, the EU’s executive arm, has proposed 18 billion euros in no-interest, long-term loans for next year, which still need approval from member governments. The U.S. will likely contribute more as well.

    Ukraine, however, is appealing for grants over loans. If all the financing comes as loans, debt would rise to over 100% of annual economic output from around 83% now and 69% before the war. That burden could hold back spending on the war recovery.

    The $85 billion in total global assistance to Ukraine, according to the Ukraine Support Tracker, is less than 15% of the support European governments have pledged to shield consumers from high energy costs resulting from Russia’s natural gas cutbacks.

    To get loans, the commission proposed requiring Ukraine to improve its record on corruption. Since 2014, Ukraine has raised its score on Transparency International’s corruption perceptions index from 26 to 32 out of 100 — not great, but improving.

    U.S. officials have praised Ukraine’s online procurement platform for introducing transparency in government contracts — one big source of corrupt dealings and collusion — and saving $6 billion.

    The prospect of EU membership also gives Ukraine incentive to clean up corruption.

    COULD THE INTERNATIONAL MONETARY FUND HELP?

    The IMF has given Ukraine $1.4 billion in emergency aid and $1.3 billion to cushion the shock from lost food exports.

    IMF Managing Director Kristalina Georgieva told The Associated Press that the Washington-based fund is working on more assistance in cooperation with the Group of 7 wealthy democracies, chaired this year by Germany.

    “We are on the way to come up with a sound and sizable program for Ukraine,” she said, “with the support specifically of the G-7 and the German leadership.”

    However, for a larger loan program of $15 billion to $20 billion, it goes against IMF practices to lend money where the debts are not sustainable, and the war raises questions about that. The organization has been reluctant to lend to countries that don’t control their territory, a condition Ukraine does not yet meet.

    The IMF “would have to seriously twist its existing framework or change it to provide substantial sums,” said Adnan Mazarei, senior fellow at the Peterson Institute for International Economics and former deputy director of the IMF’s Middle East and Central Asia department.

    As a prelude to a possible assistance package, the IMF is holding a four-month period of consultation and enhanced monitoring of Ukrainian economic policies to help Kyiv establish a track record of good practice. That could build confidence for other donors to step in.

    ———

    Associated Press writer Sam Mednick contributed from Kherson, Ukraine.

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  • Missouri man admits 26-year Social Security fraud

    Missouri man admits 26-year Social Security fraud

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    ST. LOUIS — An eastern Missouri man has admitted that he stole almost $200,000 by collecting his mother’s Social Security benefits for 26 years after her death.

    Reginald Bagley, 62, of Dellwood, pleaded guilty Thursday to a felony charge of stealing money belonging to the United States, the U.S. Attorney’s Office in Eastern Missouri said in a news release.

    Bagley did not report his mother’s death on March 12, 1994, to the Social Security Administration.

    Instead, in 1998 he set up a bank account to have her benefits directly deposited. The bank statements were sent to his address, with the name of either Bagley or his mother on them, prosecutors said.

    The scheme unraveled when the Social Security Administration tried to contact Bagley’s mother because she was not using her Medicare benefits.

    Bagley closed the bank account and received a cashier’s check for the remaining balance on July 24, 2020.

    In all, Bagley stole $197,329 in Social Security benefits, prosecutors said.

    At his sentencing on March 29, Bagley will be ordered to repay the money. He faces a maximum penalty of up to 10 years in prison, a $250,000 fine or both.

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  • Sam Bankman-Fried’s downfall sends shockwaves through crypto

    Sam Bankman-Fried’s downfall sends shockwaves through crypto

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    NEW YORK — Sam Bankman-Fried received numerous plaudits as he rapidly achieved superstar status as the head of cryptocurrency exchange FTX: the savior of crypto, the newest force in Democratic politics and potentially the world’s first trillionaire.

    Now the comments about the 30-year-old Bankman-Fried range from bemused to hostile after FTX filed for bankruptcy protection Friday, leaving his investors and customers feeling duped and many others in the crypto world fearing the repercussions. Bankman-Fried himself could face civil or criminal charges.

    “I’ve known him for a number of years and what just happened is just shocking,” said Jeremy Allaire, the co-founder and CEO of cryptocurrency company Circle.

    Under Bankman-Fried, FTX quickly grew to be the third-largest exchange by volume. The stunning collapse of this nascent empire has sent tsunami-like waves through the cryptocurrency industry, which has seen a fair share of volatility and turmoil this year, including a sharp decline in price for bitcoin and other digital assets. For some, the events are reminiscent of the domino-like failures of Wall Street firms during the 2008 financial crisis, particularly now that supposedly healthy firms like FTX are failing.

    One venture capital fund wrote down investments in FTX worth over $200 million. The cryptocurrency lender BlockFi paused client withdrawals Friday after FTX sought bankruptcy protection. The Singapore-based exchange Crypto.com saw withdrawals increase this weekend for internal reasons but some of the action could be attributed to raw nerves from FTX.

    “Sam what have you done?,” tweeted Sean Ryan Evans, host of the cryptocurrency podcast Bankless, after the bankruptcy filing.

    Bankman-Fried and his company are under investigation by the Department of Justice and the Securities and Exchange Commission. The investigations likely center on the possibility that the firm may have used customers’ deposits to fund bets at Bankman-Fried’s hedge fund, Alameda Research, a violation of U.S. securities law.

    “This is the direct result of a rogue actor breaking every single basic rule of fiscal responsibility,” said Patrick Hillman, chief strategy officer at Binance, FTX’s biggest competitor. Early last week Binance appeared ready to step in to bail out FTX, but backed away after a review of FTX’s books.

    The ultimate impact of FTX’s bankruptcy is uncertain, but its failure will likely result in the destruction of billions of dollars of wealth and even more skepticism for cryptocurrencies at a time when the industry could use a vote of confidence.

    “I care because it’s retail investors who suffer the most, and because too many people still wrongly associate bitcoin with the scammy ‘crypto’ space,” said Cory Klippsten, CEO of Swan Bitcoin, who for months raised concerns about FTX’s business model. Klippsten is publicly enthusiastic about bitcoin but has long had deep skepticism about other parts of the crypto universe.

    Bankman-Fried founded FTX in 2019, and it grew rapidly — it was recently valued at $32 billion. The son of Stanford University professors, who was known to play the video game “League of Legends” during meetings, Bankman-Fried attracted investments from the highest echelons of Silicon Valley.

    Sequoia Capital, which over the decades invested in Apple, Cisco, Google, Airbnb and YouTube, described their meeting with Bankman-Fried as likely “talking to the world’s first trillionaire.” Several of Sequoia’s partners became enthusiastic about Bankman-Fried following a Zoom meeting in 2021. After several more meetings, Sequoia decided to invest in the company.

    “I don’t know how I know, I just do. SBF is a winner,” wrote Adam Fisher, a business journalist who wrote a profile of Bankman-Fried for the firm, referring to Bankman-Fried by his popular online moniker. The article, published in late September, was removed from Sequoia’s website.

    Sequoia has written down its $213 million in investments to zero. A pension fund in Ontario, Canada wrote down its investment to zero as well.

    In a terse statement, the Ontario Teachers’ Pension Fund said, “Naturally, not all of the investments in this early-stage asset class perform to expectations.”

    But up until last week, Bankman-Fried was seen as a white knight for the industry. Whenever the crypto industry had one of its crises, Bankman-Fried was the person likely to fly in with a rescue plan. When online trading platform Robinhood was in financial straits earlier this year — collateral damage from the decline in stock and crypto prices — Bankman-Fried jumped in to buy a stake in the company as a sign of support.

    When Bankman-Fried bought up the assets of bankrupt crypto firm Voyager Digital for $1.4 billion this summer, it brought a sense of relief to Voyager account holders, whose assets has been frozen since its own failure. That rescue is now in question.

    FTX’s failure started after the cryptocurrency news outlet CoinDesk published a story, based on a leaked balance sheet from Alameda Research. The story found that the relationship between FTX and Alameda Research was deeper and more intertwined than previously known, including that FTX was lending high quantities of its own token FTT to Alameda to help build up cash. It sparked mass withdrawals from FTX, causing the crypto firm to experience a very old financial problem: a bank run.

    “FTX created a worthless token out of thin air and used it to make its balance sheet appear more robust than it really was,” Klippsten said.

    As king of crypto, Bankman-Fried influence was starting to pour into political and popular culture. FTX bought prominent sports sponsorships with Formula One Racing and bought the naming rights to an arena in Miami, and ran Super Bowl ads featuring “Seinfeld” creator Larry David. He pledged to donate $1 billion toward Democrats this election cycle — his actual donations were in the tens of millions — and prominent politicians like Bill Clinton were invited to speak at FTX conferences. Football star Tom Brady invested in FTX, as did his supermodel soon-to-be-ex-wife Gisele Bündchen.

    Bankman-Fried had been the subject of some criticism before FTX collapsed. While he largely operated FTX out of U.S. jurisdiction from his headquarters in The Bahamas, Bankman-Fried was increasingly vocal about the need for more regulation of the cryptocurrency industry. Many supporters of crypto oppose government oversight. Now, FTX’s collapse may have helped make the case for stricter regulation.

    One of those critics was Binance founder and CEO Changpeng Zhao. The feud between the two billionaires spilled out onto Twitter, where Zhao and Bankman-Fried collectively commanded millions of followers. Zhao helped kickstart the withdrawals that doomed FTX when he said Binance would sell its holdings in FTX’s crypto token FTT.

    “What a s(asterisk)(asterisk)t show … and it’s going to be crypto’s fault (instead of one guys’s fault),” Zhao wrote on Twitter on Saturday.

    ————

    Reporters Michael Balsamo in Washington and Cathy Bussewitz in New York contributed.

    ———

    For more AP coverage of cryptocurrency, visit: https://apnews.com/hub/cryptocurrency

    ———

    This story has been corrected to say that Adam Fisher is a business journalist who freelanced for Sequoia Capital. A previous version of the story identified Fisher as an employee of Sequoia.

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  • Japan steps up push to get public buy-in to digital IDs

    Japan steps up push to get public buy-in to digital IDs

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    TOKYO — Japan has stepped up its push to catch up on digitization by telling a reluctant public they have to sign up for digital IDs or possibly lose access to their public health insurance.

    As the naming implies, the initiative is about assigning numbers to people, similar to Social Security numbers in the U.S. Many Japanese worry the information might be misused or that their personal information might be stolen. Some view the My Number effort as a violation of their right to privacy.

    So the system that kicked off in 2016 has never fully caught on. Fax machines are still commonplace, and many Japanese conduct much of their business in person, with cash. Some bureaucratic procedures can be done online, but many Japanese offices still require “inkan,” or seals for stamping, for identification, and insist on people bringing paper forms to offices.

    Now the government is asking people to apply for plastic My Number cards equipped with microchips and photos, to be linked to drivers licenses and the public health insurance plans. Health insurance cards now in use, which lack photos, will be discontinued in late 2024. People will be required to use My Number cards instead.

    That has drawn a backlash, with an online petition demanding a continuation of the current health cards drawing more than 100,000 signatures in a few days.

    Opponents of the change say the current system has been working for decades and going digital would require extra work at a time when the pandemic is still straining the medical system.

    But the reluctance to go digital extends beyond the health care system. After numerous scandals over leaks and other mistakes, many Japanese distrust the government’s handling of data. They’re also wary about government overreach, partly a legacy of authoritarian regimes before and during World War II.

    Saeko Fujimori, who works in the music copyright business, said she’s supposed to get My Number information from the people she deals with, but many balk at giving it out. And no one is all that surprised she has trouble getting that information, given how unpopular it is.

    “There is a microchip in it, and that means there could be fraud,” said Fujimori, who has a My Number but doesn’t intend to get the new card. “If a machine is reading all the information, that can lead to mistakes in the medical sector, too.”

    “If this was coming from a trustworthy leadership and the economy was thriving, maybe we would think about it, but not now,” Fujimori said.

    Something drastic may have to happen for people to accept such changes, just as it took a devastating defeat in World War II for Japan to transform itself into an economic powerhouse, said Hidenori Watanave, a professor at the University of Tokyo.

    “There’s resistance playing out everywhere,” he said.

    Japanese traditionally take pride in meticulous, handcraft-quality workmanship and many also devote themselves to carefully keeping track of documents and neatly filing them away.

    “There are too many people worried their jobs are going to disappear. These people see digitization as a negation of their past work,” said Watanave, who spells his last name with a “v” instead of the usual “b.”

    The process of getting an existing My Number digitized is time consuming and very analog, it turns out. One must fill out and mail back forms sent by mail. Last month’s initial deadline was extended, but only about half of the Japanese population have a My Number, according to the government.

    “They keep failing in anything digital and we have no memories of successful digital transformation by the government,” said Nobi Hayashi, a consultant and technology expert.

    Hayashi cited as a recent example Cocoa, the government’s tracing app for COVID-19, which proved unpopular and often ineffectual. He says the digital promotion effort needs to be more “vision-driven.”

    “They don’t show a bigger picture, or they don’t have one,” Hayashi said.

    Koichi Kurosawa, secretary-general at the National Confederation of Trade Unions, a 1 million-member grouping of labor unions, said people would be happier with digitization if it made their work easier and shorter, but it was doing just the opposite at many Japanese work places.

    “People feel this is about allocating numbers to people the way teams have numbers on their uniforms,” he said. “They are worried it will lead to tighter surveillance.”

    That’s why people are saying No to My Number, he said in a phone interview with The Associated Press.

    Yojiro Maeda, a cooperative research fellow at Nagasaki University who studies local governments, thinks digitization is needed, and My Number is a step in the right direction.

    “You just have to do it,” Maeda said.

    On Monday, Prime Minister Fumio Kishida acknowledged concerns about My Number cards. He told lawmakers in Parliament that the old health insurance cards will be phased out but the government will arrange for people to continue to use their public health insurance if they are paying into a health plan.

    Japan’s Minister of Digital Affairs, Taro Kono, acknowledged in a recent interview with The Associated Press that more is needed to persuade people of the benefits of going digital.

    “To create a digitized society, we need to work on developing new infrastructure. My Number cards could serve as a passport that will open such doors,” Kono said. “We need to win people’s understanding so that My Number cards get used in all kinds of situations.”

    ———

    Yuri Kageyama is on Twitter at https://twitter.com/yurikageyama

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  • Social Security payments set for big increase. What to know.

    Social Security payments set for big increase. What to know.

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    NEW YORK — Tens of millions of older Americans are about to get what may be the biggest raise of their lifetimes.

    On Thursday, the U.S. government is set to announce how big a percentage increase Social Security beneficiaries will see in monthly payments this upcoming year. It’s virtually certain to be the largest in four decades. It’s all part of an annual ritual where Washington adjusts Social Security benefits to keep up with inflation, or at least with one narrow measure of it.

    Plenty of controversy accompanies the move, known as a cost-of-living adjustment or COLA. Critics say the data the government uses to set the increase doesn’t reflect what older Americans are actually spending, and thus the inflation they’re actually feeling. The increase is also one-size-fits-all, which means beneficiaries get the same raise regardless of where they live or how big a nest egg they may have.

    Here’s a look at what’s happening:

    WHAT’S THE BIG DEAL?

    The U.S. government is about to announce an increase to how much the more than 65 million Social Security beneficiaries will get every month. Some estimates say the boost may be as big as 9%.

    WHAT DO BENEFICIARIES HAVE TO DO TO GET IT?

    Nothing.

    WILL THIS BE THE BIGGEST INCREASE EVER?

    No, but it’s likely the heftiest in 40 years, which is longer than the vast majority of Social Security beneficiaries have been getting payments. In 1981, the increase was 11.2%.

    WHEN WILL THE BIGGER PAYMENTS BEGIN?

    January. They’re also permanent, and they compound. That means the following year’s percentage increase, whatever it ends up being, will be on top of the new, larger payment beneficiaries get after this most recent raise.

    HOW BIG WAS THIS PAST YEAR’S INCREASE?

    5.9%, which itself was the biggest in nearly four decades.

    WHAT’S THE TYPICAL INCREASE?

    Since 2000, it’s averaged 2.3% as inflation remained remarkably tame through all kinds of economic swings. During some of the toughest years in that stretch, the bigger worry for the economy was actually that inflation was running too low.

    Since the 2008 financial crisis, the U.S. government has announced zero increases to Social Security benefits three times because inflation was so weak.

    SO THE INCREASE IS TO MAKE UP FOR INFLATION?

    That’s the intent. As Americans have become painfully aware over the past year, each $1 doesn’t go as far at the grocery store as it used to.

    HAS SOCIAL SECURITY ALWAYS GIVEN SUCH INCREASES?

    No. The first American to get a monthly retirement check from Social Security, Ida May Fuller from Ludlow, Vermont, got the same $22.54 monthly benefit for 10 years.

    Automatic annual cost-of-living adjustments didn’t begin for Social Security until 1975, after a law passed in 1972 requiring them.

    HOW IS THE SIZE OF THE INCREASE SET?

    It’s tied to a measure of inflation called the CPI-W index, which tracks what kinds of prices are being paid by urban wage earners and clerical workers.

    More specifically, the increase is based on how much the CPI-W increases from the summer of one year to the next.

    IS THAT THE INFLATION MEASURE EVERYONE FOLLOWS?

    No. People generally pay more attention to a much broader measure of inflation, the CPI-U index, which covers all urban consumers. That covers 93% of the total U.S. population.

    The CPI-W, meanwhile, covers only about 29% of the U.S. population. It has been around longer than the CPI-U, which the government began compiling only after the legislation that required Social Security’s annual increases be linked to inflation.

    IS THAT WEIRD?

    Yes, and some critics have argued for years that Social Security should change to a different measure, one that’s pegged to older people in particular.

    Another experimental index, called CPI-E, is supposed to offer a better reflection of how Americans aged 62 and above spend their money. It has historically shown higher rates of inflation for older Americans than the CPI-U or CPI-W, but it has not taken hold. Neither have other measures compiled by organizations outside the government that hope to show how inflation affects older Americans specifically.

    Recently, the CPI-E has shown a bit milder inflation than CPI-W or CPI-U.

    WHY NOT USE ONE OF THOSE OTHER INDEXES?

    To calculate the CPI-E, the government pulls from the same survey data used to measure the broad CPI-U. But there are relatively few older households in that data set, meaning it may not be the most accurate.

    All indexes give just a rough approximation of what inflation really is. But the more pressing challenge may be that if the government switched to a different index, one that showed higher inflation for older Americans, Social Security would have to pay out higher benefits.

    That in turn would mean a faster drain on Social Security’s trust fund, which looks to run empty in a little more than a decade at its current pace.

    HOW IS THE SIZE SET FOR SOCIAL SECURITY BENEFITS?

    Through a complicated formula that takes into account several factors, including how much a worker made in their 35 highest-earning years. Generally, those who made more money and those who wait longer to start getting Social Security get larger benefits, up to a point.

    This year, the maximum allowed benefit for someone who retired at full retirement age is $3,345 monthly.

    WILL RICH PEOPLE GET THE SAME BOOST IN SOCIAL SECURITY?

    Yes. Everyone gets the same percentage increase, whether they have millions of dollars in retirement savings or are just scraping by.

    IF THE INCREASE IS BASED ON INFLATION IN URBAN AREAS, WILL PEOPLE IN RURAL AREAS GET THE SAME BOOST?

    Yes.

    “The COLA doesn’t take into account where you live or your actual spending patterns,” said William Arnone, CEO of the National Academy of Social Insurance. “For some people, it’s an overstatement of cost of living for, say, small towns in the Midwest versus urban areas like New York, D.C. or Chicago. With many older people choosing to live in suburban areas or rural areas, some will benefit more” than others from the same-sized increase.

    DO BIGGER PAYOUTS NOW MEAN SMALLER PAYOUTS IN THE FUTURE?

    The expected increase is great news for every beneficiary and for the businesses around them that could see more in sales. But it also means the Social Security system will pay out more money sooner, which can add more strain on its trust fund.

    One year of big increases driven by inflation won’t drain the system by itself, but it’s already long been heading toward an unsustainable future. The latest annual trustees report for Social Security said its trust funds that pay out retirement and survivors and disability benefits will be able to pay scheduled benefits on a timely basis until 2035. After that, incoming cash from taxes will be enough to pay 80% of scheduled benefits.

    WILL THIS MAKE INFLATION WORSE?

    It will put more cash in the hands of people who mostly really need it, and they’re very likely to use it. That will feed more fuel into the economy, which could keep upward pressure on inflation.

    Social Security’s boost, though, will have a smaller impact on the economy than past stimulus packages provided by Washington, snarls in supply chains caused by worldwide shutdowns of businesses or other factors that economists say are behind the worst inflation in decades.

    SO EVERYTHING’S GOING TERRIBLY?

    The risk of a recession seems to grow by the day, but many economists expect inflation to come down as interest-rate hikes take effect and supply chains continue to improve.

    Economists at Deutsche Bank, for example, expect inflation to ease from 8.2% this past August to 7.2% in the last three months of this year. In 2023, they see it dropping to 3.9% in the second half of the year.

    This is key for many Social Security beneficiaries. That would mean the COLA they receive this upcoming year would be bigger than the inflation they’re feeling at the moment. That would help make up for this past year, where actual inflation far outstripped the cost-of-living increase they got in January 2022.

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