Compliance September 28, 2023

Inflation Data Will Be Unavailable for 2024 Social Security COLA With Shutdown

The Social Security COLA would not be updated on the scheduled timeline of October 12 during a government shutdown.

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Absent legislation to fund the federal government, all non-essential staff compensated from discretionary funding will be furloughed. This includes the staffing needed to produce inflation data necessary to calculate the 2024 Social Security cost-of-living adjustment and other economic indicators key for investors and the Federal Reserve.

The Senate approved a measure on Tuesday by a vote of 77 to 19 to begin debate on a continuing resolution that would keep the government funded at current levels through November 17. If the Senate and House of Representatives cannot agree on a continuing resolution, the government will shut down on Sunday, October 1, the start of the government’s next fiscal year.

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According to the Department of Labor’s shutdown contingency plan, finalized Wednesday, the Bureau of Labor Statistics would furlough all employees.

There would therefore be nobody available to process and publish September employment and inflation data, due to be published on October 6 and October 12, respectively.

In the absence of September inflation data, the Social Security Administration would lack the data necessary to update the COLA for 2024, since the cost-of-living adjustment relies on inflation data from the third quarter, which includes September.

According to a DOL spokesperson, “In the event of a federal government shutdown, the Bureau of Labor Statistics will suspend data collection, processing and dissemination. Once funding is restored, BLS will resume normal operations and notify the public of any changes to the news release schedule on the BLS release calendar.”

The calculation of the COLA would be postponed until the BLS could resume its normal operations. A continuing resolution would permit the BLS to continue operating, but negotiations between the parties and chambers have not produced a timeline for final floor votes.

Inflation and employment data are also key metrics for the Federal Reserve’s monetary policy. Other agencies, such as the Census Bureau and the Bureau of Economic Analysis, both organs of the Department of Commerce, would also be shuttered.

The Employee Benefit Security Administration would furlough 743 of its 908 employees. The 165 who would remain include essential employees not subject to furlough and those employed using other funding.

EBSA would only be empowered to bring enforcement actions if missing a statute of limitations is at stake or if human life is at stake, such as denial of medical benefits in life-threatening situations, according to the DOL’s contingency plan. EBSA can also continue to administer the Mental Health Parity and Addiction Equity Act and the No Surprises Act, both funded separately.

The Pension Benefit Guaranty Corporation would be unaffected by a government shutdown, including all customer service and support services. The PBGC is funded primarily through insurance premiums and therefore does not rely on the annual appropriations process.

SEC Chairman Gary Gensler said on Wednesday that the Securities and Exchange Commission would be unable to process new IPOs or take new enforcement actions if a federal shutdown happens.

Data & Research September 28, 2023

Few Retirees, Pre-Retirees Seek Advice Despite Financial Security Fears

Only 35% of retirees and 37% of those 50 or older look to a financial professional for advice, Transamerica finds.

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Despite fears of declining finances and health, only 35% of retirees and 37% of those aged 50 or older currently consult a professional financial adviser, according to a new survey from the Transamerica Institute and the Transamerica Center for Retirement Studies.

Among workers 50 or older, just 17% said they are very confident they can maintain a comfortable lifestyle throughout their retirement. Based on estimated medians, retirees have saved $73,000 in total household savings, excluding home equity, while workers 50 or older have saved $133,000 in total household retirement accounts.

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“Retirees and pre-retirees have limited financial means,” Catherine Collinson, CEO and president of Transamerica Institute and its center for retirement studies, said in a statement. “Both cohorts are susceptible to the turbulent economy and inflation. A harsh reality is that many lack the resources to cover the cost of a major financial shock.”

The greatest retirement fear among pre-retirees is outliving their savings and investments, reported by 45% of older workers, compared with 32% of retirees who said the same.

Meanwhile, 42% of older workers and 39% of retirees fear Social Security will be reduced or cease to exist in the future. Many worry about declining health that requires long-term care (41% and 35%, respectively) and possible long-term care costs (35% and 28%).

Collinson says many retirees and pre-retirees lack financial security due to the increasing societal pressure that workers self-fund a greater portion of their retirement income than in the past. However, many do not have the know-how or resources needed to succeed.

“Their experience is a call to action for policymakers to modernize our retirement system by paving the way for the successful implementation of the SECURE 2.0 Act of 2022 and addressing persistent structural barriers to retirement security, for example by ensuring that all workers have the opportunity to save for retirement in the workplace and requiring that financial literacy be taught in public schools,” Collinson said in the statement.

The survey findings revealed common mistakes hindering more rigorous planning, include being overly optimistic about retirement expectations, overlooking life expectancy and claiming Social Security benefits too early. Other mistakes revealed were taking inadequate steps to safeguard health and failing to plan for long-term health.

The findings came from Transamerica’s 23rd Annual Retirement Survey. A 28-minute online survey was conducted within the U.S. by the Harris Poll on behalf of Transamerica Institute and the Transamerica Center for Retirement Studies between November 8 and December 13, 2022. The firm surveyed a sample of 2,546 workers who were at least 50 years old and employed, self-employed or unemployed but looking for work and a sample of 2,104 who were retired and did not work.

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