Category Archives: Retirement Planning

Ideas to help preserve and grow your money

A Social Security Claiming Strategy to Consider

SSA-image-2My Comments: Every choice when it comes to filing for Social Security benefits comes with trade-offs. Whether one works for you to a large extent is determined by how long you live, and for most of us, that’s the elephant in the room. But if you assume you and your spouse will live to a normal life expectancy, this one might make sense for you if your circumstances fit the pattern.

by Joe Lucey on May 17, 2016 on MarketWatch

The 2015 bi-partisan budget act killed the “File and Suspend” as of April 29. But that doesn’t mean the end of smart Social Security election options that could add significant dollars to your Social Security income in retirement.

If you and your spouse were born on or before Jan. 1, 1954 — meaning you are both 62 years of age or older as of Jan. 1, 2016 — and both qualify for social security benefits this strategy could work for you.

It’s called “restricted application,” but is more accurately described as a “spousal claiming strategy”.

Here’s how it works.

When you are claiming social security benefits, you have three basic options:
• You can claim your benefits at age 62 early with a penalty (up to 25% less than your full benefits).
• You can claim your benefits at full retirement age (66 or 67 depending on when you are born) with no penalty.
• You can delay claiming your benefits up to age 70, with every year you delay adding an additional 8% to your monthly benefits.

But when you use “Restricted Application”, you get a valuable fourth option that allows you to claim spousal benefits without having to claim your Social Security benefits (yet).

Not only will you max out your social security benefit by delaying it until 70… but you’ll also get income while you wait for it to mature.
Essentially, you get paid extra to wait.

Let’s look at an example

Jack and Jill are married and just happen to be born on the exact same day. Today is their 66th birthday and they are ready to retire now that they have both reached full retirement age.

Jack is an engineer at a large company and Jill is a schoolteacher at the local high school. Jack has a Social Security benefit of $2,400/month and Jill’s is $2,000/month.

Their initial plan was to claim their full benefits as is and call it a day, but see how this strategy would boost their retirement income.

f they claim their full benefits, they would receive $4,400/month (or $57,600/year). For the remainder of their retirement, they would continue to receive $4,400/month.

But what happens if Jack uses “restricted application” to delay his benefits until 70 and claim his spousal benefit (which is 50% of Jill’s full benefit) instead? In the short term, Jack and Jill will earn less. But once Jack turns 70, he will now begin to claim his own Social Security benefit that has now increased to $3,168/month meaning the couple will now earn $5,128/month.

That means Jack and Jill will be earning an extra $9,216 every single year.

Seeing as how many retirees are living much longer than they used to, this makes a significant difference over a 30-year retirement.

The “restricted application” strategy wont produce more total income until the 12th year of retirement, but over 30 years winds up producing $172,416 of additional income.

Additionally, if we assume that Jill is going to outlive Jack, this also increases the survivor benefit for Jill meaning she will continue to $5,128/month as a widow.

Making this strategy work for you

Keep in mind that retirement planning is all about trade-offs. Not all strategies make sense for all couples, but it’s important that you explore your options. Otherwise, you might just be missing out on tens or even hundreds of thousands of dollars you could be enjoying in retirement.

Like any investment strategy, a variety of other factors — pensions, annuities, investments, savings, life expectancy, and taxes to name a few — need to be considered when deciding what will work best for you.

Before making any decisions about what to do with your social security, I strongly recommend you speak a financial professional familiar with social security and retirement income planning.

It’s extremely difficult to undo your Social Security claiming strategy once you make your selection, so make sure you do this right.

Why Retirement Is a Flawed Concept

retirement_roadMy Comments: Did you see the recent study that suggested continued part time work had a very positive effect on your health? My impression is that if you retire without a manifest new purpose in life, you are essentially sitting around waiting to die.

I am aggressively filling my time with activities that reflect my past 40 years as an entrepreneur in financial services. I refuse to sit around waiting to die.

By Neil Pasricha, April 13, 2016

Every day there’s another article about how all of our retirements are doomed. Public pension promises in the U.S. vastly exceed their ability to pay. We now need nearly $400,000 at age 65 just to cover health care costs. And retirement itself increases your risk of depression by 40%.

For many of us, it’s starting to feel like the light at the end of the tunnel of life has been blocked by a triple-bolted steel door. Who’s to blame for this mess?

The Germans.

Yes, back in 1889, German Chancellor Otto von Bismarck invented the idea of retirement, establishing the concept for the rest of us. “Those who are disabled from work by age and invalidity have a well-grounded claim to care from the state,” he said at the time. He wanted to address high youth unemployment by paying those 70 and older to leave the workforce, and other countries followed suit with retirement ages around 65 or 70.

But there is one big difference between 1889 Germany and the world we live in today: The average lifespan then was 70 years. Now we’re all living much, much longer. And many of us would like to retire much earlier. But the scary headlines — and the realities that we see around us — cast doubt on our ability to ever retire. The entire concept of retirement is starting to feel flimsy at best.

So what are we to do, short of working the rest of our days away?

To get to the root of the issue, let’s look past the North American shorelines (where I live) all the way to the beautiful sandy islands of Okinawa, in the East China Sea. According to the Okinawa Centenarian Study, men and women in Okinawa live an average of seven years longer than Americans and have one of the longest disability-free life expectancies in the world.

Dan Buettner and fellow researchers from National Geographic studied why Okinawans live so long. What did they find out? Among other things, Okinawans eat off of smaller plates, stop eating when they’re 80% full, and have a beautiful setup wherein they’re put into social groups as babies to slowly grow old together.

But they also have an outlook on life that is very different from those in the West. While we think of retirement as the golden age of golf greens and cottage docks, guess what they call retirement in Okinawa?

They don’t. They don’t even have a word for it. Literally nothing in their language describes the concept of stopping work completely. Instead, one of the healthiest societies in the world has the word ikigai (pronounced like “icky guy”), which roughly translates to “the reason you wake up in the morning.” It’s the thing that drives you most.

Toshimasa Sone and his colleagues at the Tohoku University Graduate School of Medicine wondered whether having an ikigai could actually help extend longevity, health, and late-life stability, so they put the concept to a test. They spent seven years in Sendai, Japan, studying the longevity of more than 43,000 Japanese adults with regard to age, gender, education, body mass index, cigarette use, alcohol consumption, exercise, employment, perceived stress, history of disease, and even subjects’ self-rated scores of how healthy they were. Then they asked every single one of these 43,000 people, “Do you have an ikigai in your life?”

Participants reporting an ikigai at the beginning of the study were more likely to be married, educated, and employed. They had higher levels of self-rated health and lower levels of stress. At the end of the seven-year study, 95% of the folks with an ikigai were alive.
 Only 83% of those without an ikigai made it that long.

To put it another way: We don’t actually want to retire and do nothing. We just want to do something we love. And I’m not talking about endless days of back nines, fishing, and sailing into the sunset. While we might want some time to do those things, you’d be surprised to learn how quickly the bloom can come off of that type of rosy retirement. I believe that we’d all be better served by taking the concept of ikigai and distilling it into what I call the 4 S’s:

Social: Friends, peers, and coworkers who brighten our days and fulfill our social needs.
Structure: The alarm clock ringing because you have a reason to get up in the morning, and the resulting satisfaction you get from earned time off.
Stimulation: Keeping our minds challenged by learning something new each day.
Story: Being part of something bigger than ourselves by joining a group whose high-level purpose is something you couldn’t accomplish on your own.

Now, am I saying that if you’re six weeks away from your final punch-out after 30 years on the job, you should suddenly skewer your dreams and ramp up for 30 more? Of course not. What I’m saying is that retirement is a Western invention from days gone by that’s based on broken assumptions that we want — and can afford — to do nothing.

If you’re already struggling to pay bills and your career’s sitting on tectonic plates that are threatening to shift below the labor market, my recommendation is to dig deep into your natural passions to find a second act that aligns with your values. We know there are far more problems and opportunities on this spinning planet than there are people to help with them, so go solve some! If you feel lost, follow your heart, find your ikigai, and remember the 4 S’s.

And stop worrying that you won’t ever be able to retire. You’ll be far better off if you don’t.

Ready to retire? Don’t rush your Social Security start date

My Comments: A major determinant for when you should start taking your Social Security benefits comes down to when you plan to die. If you plan to die soon, then start the payments as early as possible; if you plan to live to be 100, and have enough money now, then delay the start of payments as long as possible.

March 31, 2016

For most Americans, Social Security is a big part of their retirement income

An estimated 91% of Americans aged 65 or older receive Social Security benefits—the average annual benefit for a retiree is about $16,000. For most of these retirees (64%), Social Security represents a significant portion of their income. Even for affluent retirees (those aged 60–79 with at least $100,000 in financial assets), Social Security accounts for 29% of total retirement income, on average. Given that Social Security provides a base level of guaranteed income for most retirees, it’s an important benefit for investors and their advisors to consider when designing a comprehensive plan for retirement income.

By delaying Social Security, retirees can stretch their savings

In the past, the decision as to the “right” time to claim Social Security has often been based on a break-even analysis of a retiree’s expected benefits versus his or her life expectancy. That approach, however, ignores two key features of Social Security, namely: Once you start receiving it, it’s paid for the rest of your life, no matter how long you live, and is adjusted upward for inflation. A big concern for most retirees is the risk of outliving their savings.

For many retirees who can afford to do so, deferring Social Security for a few years (even past their “full retirement age”—defined by Social Security according to one’s birth year—to the maximum annual benefit at age 70) greatly increases their lifetime monthly benefit. Given that at age 65, more than 50% of women can expect to live past age 88 (and 50% of men past 85), delaying Social Security can provide powerful longevity protection.

Social Security acts like an inflation-protected annuity

The act of delaying the claiming of Social Security is analogous to purchasing an inflation-protected deferred income annuity. Benefits increase by up to 8% in real terms for every year that claiming is delayed. The chart below  demonstrates the effectiveness of a deferred claiming strategy both for increasing guaranteed income and for providing longevity protection. Also, in the case of a married couple, one of whom, for instance, delays claiming until age 70 (for maximum benefit), a surviving spouse receives the larger of the two Social Security benefits—thus further demonstrating Social Security’s role in protecting lifetime income.

Thoughtful claiming strategies can help retirees make the most of their benefits

A careful review of Social Security regulations, your financial situation, and any health considerations you may have are crucial to developing a strategy to maximize income during retirement. (Note that the regulations can be complex, and you may benefit from seeking professional advice.) For individuals in poor health or with little or no other financial resources, early Social Security claiming may be appropriate, but for most retirees, the increase in guaranteed income gained by deferring Social Security makes waiting to start benefits an appropriate strategy. The accompanying chart shows the potential impact on a couple’s lifetime Social Security income of three different approaches: both spouses claiming at 62 (the earliest possible age), a hybrid strategy where one spouse claims at age 62 while the other delays until age 70, or both spouses delaying until age 70 to accumulate the maximum amount of delayed retirement credits.

Why You’ll Need to Own More Stocks After You Retire

retirement_roadMy Comments: For many of us, retirement once seemed like a glorious goal to achieve. Now that many of us are here, the light isn’t so bright.

As a financial planner, both for myself and others, the landscape is very different from what it was as little as twenty-five years ago. The fundamentals are the same, but how you get there is very different.

These comments from Ryan Derousseau speak to some of the changes in the landscape.

March 26, 2016 by Ryan Derousseau

Unless you’re already unspeakably rich.

Retirement planners like to relay best practices to clients via simple, easy-to-understand rules. Whether it’s sticking to a 4% yearly withdrawal rate or having your bond exposure match your age, these rules-of-thumb have translated into investing strategies for years now.

Of course, these tips come with plenty of research to back them up – a 4% withdrawal rate has a strong chance of lasting a lifetime, for example. But sometimes these rules get turned upside down.

One rule undergoing such an evolution has to do with stock exposure during retirement. For a long time, conventional wisdom has held that your stock exposure should steadily decline as you age. But a growing number of experts think that today’s retirees need to keep much more of their portfolio in the stock market than they might expect.

In the past, when the typical retirement lasted 10 to 15 years, there wasn’t a huge need for stocks in the portfolio. But, the “retirement time horizon has gone up,” says Stuart Ritter, vice president at T. Rowe Price Investment Services and a financial planner at the firm.

With people living longer, the need to take on the risk of stocks (in return for the potentially greater reward) has increased. Though inflation has been low lately, its threat to the value of your retirement savings grows with greater longevity: While a dollar’s value may not decrease much in a decade, it will decrease a lot over 35 years.

These trends have led a growing number of financial planners to advocate a rising equity “glide path.” While this idea isn’t as easy as others to sum up with a platitude, the basic idea is that your exposure to stocks should increase, rather than decrease, as you age in retirement.

Working with the American Institute for Economic Research, Luke Delorme conducted a study to determine the ideal asset-allocation strategy for retirees, assuming a 4% withdrawal rate. The best strategy, he found, was to begin with a 20% allocation of stocks as you enter retirement at age 65, and then increase that allocation gradually every year, over 30 years, until you have a 70% equity exposure at age 95.

“The time that people need to be most conservative is not in retirement,” says Delorme. “but at the beginning of retirement.”

Here’s why: Your portfolio is most vulnerable to risk right after you retire. If the market takes a tumble during the first few years of your extended vacation, then it’s difficult to rebuild your portfolio without going back to work. So keeping stock exposure low at that point protects you from the potential of losing out in the beginning of retirement. But since stocks have historically risen an average of 7% a year over the long-term, gradually increasing your exposure over time increases your odds that your portfolio will last into your later years.

If you have a pension, you can take a bit more risk, says Delorme, who now works as director of financial planning at American Investment Services. You can have a higher allocation of stocks when you leave the workforce, and you can increase stock exposure to 80% within retirement.

T. Rowe Price’s Ritter explains the glide path concept differently. He places client assets into two buckets – one for the first 15 years of retirement, the other for the second 15. In the “first 15” bucket, assets be concentrated in on safe, short-term investment vehicles like bonds and fixed income. The second 15 years’ worth of savings goes into stocks. Placing clients’ money in the two buckets, Ritter says, “helps put the short term volatility” of the market into the context of a broader strategy; investors who know their short-term needs are taken care of are less likely to get scared and pull money out of the market.

While they may not use the term “rising equity glide path,” more financial planners are latching on to the idea of increasing stock exposure in retirement. You often hear of a 50-50 stock to bond ratio for retirees these days. And if you have a higher withdrawal rate, chances are you will also need to take on more risk (unless your nest egg is truly massive). “The biggest driver is less around the allocation of risk,” says JPMorgan Private Bank’s David Lyon. Instead, it’s based on “how much you’re spending on your balance sheet.”

In other words, if you have expensive tastes, then you may want to get used to living with more risk. That’s not a cliché; it’s life.

How To Retire Despite Low Interest Rates

retirement-exit-2My Comments: Don’t expect interest rates to increase anytime soon.

Decisions by the Fed will influence the prevailing level of interest rates but in the background is the everpresent supply and demand curve. This simply states that the price being paid (interest rate) is a function of how much there is available compared to the demand for whatever is being sold.

Right now there is a ton of money in the system. Many would argue there is too much and the Fed screwed up. But it is what it is and until either the demand increases or the supply shrinks, you’re going to see historically low interest rates.

by Doug Carey, Owner and President, Wealthtrace

Interest rates are extremely low, which is bad news for those who have been planning to have a fixed income in retirement. Ten years ago, the yield on ten-year Treasury bonds was above 5%. Today it sits at 1.8%, which is below the rate of inflation.

Low Interest Rates Have Made It Tough For Retirement Plans
Many of us can remember how our grandparents and parents lived off the income that came from bonds in retirement. Before rates decreased so much, less money was needed in retirement. I’ve written before about how much money it takes to retire comfortably. Just how difficult can it become to live off of treasury income in retirement today compared to just a few years ago?

Case Study
I shared this analysis in our WealthTrace financial planner using a case study of a retired couple aged 65. Their entire investment of $500,000 is comprised of ten-year Treasury bonds in IRA accounts. My other assumptions are that their annual Social Security payments will be $30,000 and that their yearly expenses will total $45,000 (not including taxes). Lastly, inflation is 2.5% in my case study and this couple is counting on living until age 95.

When I ran this analysis, my goal was to find out whether this couple’s retirement savings would run out, and at what age it would happen. I then wanted to compare that to the time when interest rates were much higher and the yields from Treasury bonds were 5%.

I did indeed find that our couple would outlive their money in retirement in today’s environment by the age of 80. Some might say, “They probably won’t live until 80!” But the odds are nearly 50/50 that they will. So, something has to change with their plan.

What did we find if interest rates were back to the 5% level? We found that the couple would have money in the bank until age 100, which would provide for any unexpected costs.

And what happens if interest rates rise to 6%? Their money would hold out until the ripe old age of 105.

The Past And The Present
There is not much use in talking about what could have been. The fact is that interest rates are incredibly low today. The question is, how do we change the situation for our couple? What if they had aimed to have their retirement savings last until age 100? I used our financial planning tool to run some scenarios and put together some ways they can make this happen: 1) They can reduce their expenses by $5,000 per year or 2) They can work part-time for another fifteen years, earning $35,000 per year. Most people will give a big thumbs-down to such ideas.

What if instead we get them out of their low-yielding Treasuries and into solid dividend-paying stocks? I’m not talking about just any old dividend payers. We want those companies with a history of increasing their dividends year in and year out. So, I moved a third of their funds into dividend growth stocks that have a history of paying and growing dividends over time.

I normally only recommend and invest in companies which yield dividends above 2.5% and a solid history of increasing their dividends over time, even in recessions. Three of my favorites that meet these criteria are Johnson & Johnson (NYSE: JNJ), Coca-Cola (NYSE: KO), and AT&T (NYSE: T).

Following this strategy, we could move a third of our couple’s money into a basket of reliable dividend payers like the three companies I mentioned. What difference would this make to their savings? It turns out that at age 95 they would have about $20,000 left. If we move half of their money into these companies, they would have $60,000 left.

Bonds Will Not Be Enough For Most
This analysis shows that bonds will not suffice for most people planning for retirement. It also shows that a) Retirees need to overcome inflation – if their income is less than the inflation rate, they are fighting a losing battle each year, and b) The power of growing dividends over time can have an immense impact on a retirement plan.

It’s a rough world for retiring these days with interest rates so low, but there are other options to the usual savings methods. Using solid dividend-growth stocks for income in retirement can make all the difference.

Read This Before You Take Social Security Benefits

My Comments:Social Security card Social Security is a complicated topic. If you are not yet 70 years old, and/or have not yet committed to how you will take your Social Security benefits, you should read this.

With so many variables, the typical process for making a good decision is total confusion for most people, even financial planners. The net effect is that for many of us, there is money left on the table at the end of the day. This author reduces much of the confusion to simple concepts that are a great starting point. If you are still confused, or have more questions, call me.

By Dan Caplinger Published March 13, 2016

Many retirees rely on Social Security for most or all of their income in retirement. Before you make a decision that will have major financial implications for the rest of your life, it’s important to know everything at stake in the timing of when you take your benefits. Here are a few things to consider.

Fewer big payments vs. more small payments

Most people have what amounts to an eight-year window to claim Social Security. Earliest eligibility is at age 62, and 70 is the latest age at which Social Security provides any financial incentive to wait. The key decision with Social Security is whether to take a reduced benefit that will give you the maximum number of monthly Social Security payments, or whether to wait and take a higher monthly benefit but receive it for a shorter period of time.

You can find plenty of articles discussing the trade-offs involved with claiming at age 62 versus waiting until full retirement age (currently 66) or age 70 to claim. But a lot depends on your individual situation. For instance, single retirees who won’t have anyone else claiming on their work history can look solely at their own personal situation to make a smart decision about when to take Social Security. For those with family members who will receive spousal or survivor benefits, decisions that might make sense solely from your point of view might not be the best for your family as a whole. You can run numbers projecting which choice will result in your receiving more total money.

But only you can make a personal assessment whether the true value of that extra money is worth the trade-off of having to wait for it. The important thing is not just to make a knee-jerk decision but rather to consider all the factors involved and what they mean to you and your life.

If you’re working and claim early, Social Security could take back your benefits anyway

The worst result in many people’s eyes is to start collecting Social Security benefits only to have the government take them away. Yet that’s what happens to some people who continue to work in their early 60s and choose to take early benefits.

If you haven’t yet reached full retirement age, there’s a limit on how much you can earn before Social Security forces you to forfeit benefits. If you will not reach full retirement age this year and earn more than $15,720, then you’ll lose $1 in annual Social Security payments for every $2 above the limit you earn. For those who hit full retirement age during the year, a higher limit of $41,880 applies to earnings before the day of the year you reach full retirement age, and the forfeiture is $1 for every $3 above the limit.

This forfeiture doesn’t result in a complete loss, because the Social Security Administration treats you as if you had delayed taking Social Security for any full month of forfeited benefits. But if that’s what’s going to happen anyway, it can make more sense just to delay filing until your income will be under the threshold — or until you reach full retirement age.

You can get a do-over on your decision, but only for a limited time

Many people regret their decision on when to take Social Security after the fact. There is a way to undo your claiming decision, but you have only a limited time to do so, and there are some key requirements that pose a hardship for many.

In order to get a do-over, you have to use a strategy that’s known as withdrawing your Social Security applications. Form SSA-521 provides for this request, and it provides space for you to indicate the reason for the withdrawal and other related information. You can only file Form SSA-521 once in your lifetime, and it’s only available within the first 12 months after your initial application for Social Security benefits.

The hardest part of the withdrawal application is that if approved, you have to return any money you received from Social Security since you claimed benefits. Many retirees aren’t in a position to pay back up to a year’s worth of Social Security payments, and that can make the strategy impractical for them.

The decision of when to take Social Security is a key one. Being informed is the first step toward making sure you do the best thing for your situation.

The ‘Retirement Crisis’ That Isn’t

retirement_roadMy Comments: Social security payments to my wife and I are a critical element of the life we live. It can be argued that without those payments, we’d have scaled back in terms of what we spend for food and housing. The fact remains that given expectations of a monthly income from that source, our life is what it is.

That money does not disappear down a rat hole. It’s used to buy things and as such, it flows into the economy of Gainesville, Florida to a large extent. The same can be said of every household in the US that receives social security payments. Those dollars contribute to the gross national product of this country, and can be considered essential to the accumulating retirement accounts that will allow the next generation to retire with dignity.

You should read this in the context of what it would take to increase the viability of future social security payments beyond the currently expected ‘crisis’ date of 2033. See my EARLIER POST on this topic.

By Andrew G. Biggs December 29, 2015

Ask pretty much anyone and they’ll tell you: Americans are undersaving for retirement. It’s not just thought to be a few households falling through the cracks. Rather, there’s a perception that, after a “golden age” of traditional pensions that lasted from World War II until about 1970, most Americans won’t have nearly enough income in retirement to maintain their pre-retirement standards of living. Financial writer Jane Bryant Quinn states the view succinctly: “America’s retirement savings system has failed.” All the Democratic presidential candidates have proposed expanding Social Security benefits to address this “retirement crisis.”

But new data shed light on America’s retirement system, both how it compares with the systems in other countries and how retirement savings are developing over time. The results may surprise you.

On Dec. 1, the Organization for Economic Cooperation and Development (OECD) updated its Pensions at a Glance survey of retirement saving in more than 30 countries. The United States’ Social Security program is indeed less generous than most OECD countries’ plans. Americans who earn the average wage each year of their careers will receive Social Security benefits equal to about 35 percent of the current average U.S. income. Note that comparing a country’s retirement benefits with that country’s current average income is different from a “replacement rate” that compares retirees’ benefits with their own pre-retirement earnings. Nevertheless, these data show that while Social Security is comparable to retirement programs in Britain (30 percent) and Canada (33 percent), it’s still below the OECD average of 53 percent.

But retirement income security is about more than just government benefits. It also includes private retirement saving and work in retirement, where the United States does very well. The total incomes of Americans age 65 or older are equal to 92 percent of the national average income, according to the OECD. The United States ranks 10th out of 32 OECD countries and above countries such as Sweden (86 percent), Germany (87 percent) and Denmark (77 percent). In absolute dollar terms, U.S. seniors have the second-highest average incomes in the world, behind tiny Luxembourg.

But what about working-age Americans? Hasn’t their retirement saving fallen? Using Federal Reserve and Social Security Administration data, I tallied the total assets Americans have built for retirement, including 401(k) and Individual Retirement Account balances and benefits accrued under traditional pensions and Social Security. As of 1996, the first year for which full data are available, Americans’ total retirement assets were equal to 2.7 times total personal incomes. By early 2015, retirement assets had risen to 4.1 times personal incomes.

In fact, the historical shift from traditional pensions to 401(k) plans has not reduced retirement saving, Boston College’s Center for Retirement Research recently concluded. It’s true that with 401(k)s, workers themselves bear the risks related to how their retirement funds are invested. But retirement saving is more widespread: More Americans have retirement plans today than did during the “golden age.” And unlike with traditional pensions, which pay a decent benefit only to long-term employees, members of America’s mobile workforce can carry their 401(k) plans with them as they change jobs.

Are some Americans falling short? Unquestionably, and retirement policy needs to help them. For instance, unmarried, less-educated women are far less likely to be financially prepared for retirement, in part because many fail to meet Social Security’s 10-year vesting period to qualify for benefits. Paying a universal minimum benefit to all retirees, which Social Security doesn’t currently do, would reduce old-age poverty caused by short working careers.

Likewise, many small businesses don’t offer 401(k) plans, due to the high fixed costs of establishing the plans. “Starter 401(k)s” with lower regulatory costs or multiple-employer 401(k)s could make offering retirement plans more affordable.

But massive Social Security expansions are unnecessary and unaffordable. Unnecessary because, as the OECD data show, when government retirement programs offer more generous benefits, households do less to prepare for retirement. On average, for each dollar of additional retirement benefits paid by an OECD government, households in that country generate 82 cents less in income through personal saving or work in retirement. Across-the-board benefit hikes would almost certainly result in lower retirement saving by middle- and upper-income households, which receive most of the benefit increases under expansion plans such as those proposed by Democratic presidential candidate Bernie Sanders.

Benefit expansions are also unaffordable. While the Democratic presidential candidates have promised expanded Social Security benefits, none have proposed plans that would enable Social Security to pay for the benefits it already has promised. That’s important, since Social Security’s long-term funding shortfall rose by 58 percent from 2008 to 2015.

The data show that the biggest retirement danger isn’t that Americans haven’t saved enough. It is politicians, both past and present, who promise Social Security benefits without paying for them. That’s the true retirement crisis the presidential candidates need to address.

Andrew G. Biggs, a resident scholar at the American Enterprise Institute, was principal deputy commissioner of the Social Security Administration from 2007 to 2008. He served on the Society of Actuaries’ Blue Ribbon Panel on Public Pension Plan Funding from 2013 to 2014.