President Barack Obama announced his 2012 budget proposal Monday, throwing a few bones to people living in retirement and attempting to wrest a few away.
Here's how the 2012 budget proposal would most directly affect your retirement planning:
Money in retirees' pockets. The biggest offering is a $250 "economic recovery" payment that would cost $15 billion and offset the rising cost of Medicare, keeping most Social Security recipients even with what they receive this year when, for the second year in a row, there is no cost-of-living raise.
More opportunities to save. Obama proposes requiring employers that don't currently offer a retirement plan to at least set up an IRA plan and automatically enroll employees. Employees can opt out, but research shows that most don't. To sweeten the deal for employers, the budget proposal includes a plan to double the amount employers can deduct to offset startup costs from $500 to $1,000.
More money for Social Security. The proposal would increase funding to the Social Security Administration to pay for more workers and technology to reduce backlogs, including the two-year backlog of disability claims.
Better pension guarantees. The Pension Benefit Guaranty Corp., the government agency that insures private sector pensions, can't currently adjust the premium it charges the companies whose retirement plans it guarantees. The budget plan would give PBGC that ability, which means it can charge companies whose finances are shaky more money than it charges companies with solid plans. This is likely to put the program on more solid footing and encourage companies to pay attention to the financial condition of their plans.
However, some of the proposals aren't so retiree friendly:
Cuts in senior job program. The budget plan would cut 45 percent from the Senior Community Service Employment Program, which helps unemployed older adults who need to remain in or return to the work force. The program is limited to people with incomes no higher than 125 percent of the federal poverty line -- currently $13,613. The National Council on Aging calculates that cutting this program would result in the loss of over 55,000 part-time jobs.
Upping estate taxes. The proposal would raise the estate tax in 2013 to what it was in 2009 with a $3.5 million estate tax exemption per person, a $1 million per person gift- and generation-skipping tax exemption and a 45 percent tax rate on everything else. The program does allow portability of the estate tax exemption for couples, allowing any unused exemption when the first spouse dies to be added to the exemption available when the surviving spouse passes on.