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Retirement and the 2012 budget

By Jennie L. Phipps ·
Tuesday, February 15, 2011
Posted: 2 pm ET

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.

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April 14, 2011 at 8:29 am

Including news about the estate tax is actually a bit silly. After all, it only applies to the estates of people who are, hello, DEAD, at which point they are no longer retirees, now are they? A survinging spouse who is a retiree (if you've never worked, are you still considered a retiree?)is not affected because of the portability of the tax. Further, since the tax applies only to estates of over $3.5 million, it applies to just a tiny fraction of all estates in the U.S.

Ann Mullin
March 18, 2011 at 6:45 pm

I strongly support the opportunity to receive social security at age 62. My husbands health is deteriorating and he
hasn't been able to find work in his field (contractor) for the last couple of years. It is extremely difficult to compete for these jobs with people half his age. I also wonder what happens to all the money invested in SSI from people who die before they are able to collect it, or die shortly after being eligible. Seems to me there should be an adequate amount left in the pool for people who NEED to begin collecting the amount they have PAID into the fund by age 62.

sam hall
March 04, 2011 at 6:08 pm

The USA first became a debtor nation under the Regan adminstration. Does that show any thinking person the trickle down theory of the ultra right wing and tea party of today does not work. it never has in any place in history. If jobs for Americans in America that pay decent wages for necessary living costs of today..more money goes into Social Security fund..less people have to go on Medicaid if they can even find a doctor that will take this or Medicare in some states. Take the tax brakes away from the ultra rich..they have not provided jobs for Americans in America for a long time. they invest in stocks in other places.

sam hall
March 04, 2011 at 6:00 pm

Do you know under what President we became a debtor nation when the USA had never been before? It was under the Regan adminstration. As a comment person said on this section..stop rebuilding other places..rebuild here..stop the repeal the health care reform..which has been needed for years with the ever rising heathcare costs..Obama said from the first a needed bill which it was but as complex as it needed to be will have to be tweaked..which Obama has been very willing to do. Gates who served under Bush and Obama just said it is crazy to try to win a war Americans in that place..our troops. Get oil prices down..Saudi Aribia has said..oil should not be above or it is necessary over look at it now..of course the Lybia situation where many Europe places get their oil and thanks to our ultra to big to fail coporations and Wall st. speculators they have made these other places with people now..wanting more cars etc while Americans even in Alaska when much oil drilling was being done..has always had the highest gasoline prices in our nation only 2nd to Hawaii..never yet a news report that explains why this is..where is the investigative real reporting?

February 24, 2011 at 11:33 pm

I would say all building government or schools should be solor energy. thus in the summer it makes money for the districts.. No brainer. Saves money in long run for tax payers. Then cut our all this bull of rebuilding other countries and get our money back here. Jobs going to china is a political bull so the rich can get around our labor laws. thus fineing them and taxing them harder so there imports cost more than products made here would help get jobs back in USA. If that dont work I would suggest we kick everyone out of office and make sure we put term limits back in affect for all government oficials esp. house and senate. they are getting old and you cant teach a old dog a new trick they only have there game plans from the 50s and 60s and that dosnt work for the 21st centery we should be off oil by now but because of political and favors owed for getting elected we stay in a stand still and who loses the American Not the government they keep liveing the dream free trips free money free drinks free rooms free protection and what does that mean for us tax payers less money. They wont stop until where all broke or we throw all the bumbs out.. I mean all of them and only put folks in office whom make 40k or less. Any way if we keep spending money in other countrys and sinking the ship at home we all will be hurting sooner or later even the rich. I remember what happend when the rich sent only the poor to war back in New york they burned there city to the ground Do u think that folks are not getting desprit in this econimy then ether u are blind or dont care.. I would say we need to take care of Americans first then when that problems solved we can work on others problems.. fix your own house first.

Mark V
February 19, 2011 at 7:50 pm

Wether the money is borrowed or not the fact is the only people who complain are those who don"t need it.The majority who do are not as vocal because they cannot even afford a computer or to go online.You would think that compassion for those in need outweighs the greed of those who wouldn"t give a nickel for a starving child.Shame on you for not giving from your heart regardless of wether you had to beg borrow or steal.

February 18, 2011 at 1:14 pm

y dont the president ask senator,congress,an the house to give up 1 month of there pay? they got us in this mess with there bad choose let them pay an leave the poor an old alone!!!

Ted P
February 15, 2011 at 11:37 pm

What the author left out is that about a third of Obama's S3.7 trillion budget is borrowed. For every $2 he spends, he borrows $1. Our money is backed with nothing. The fed just added $600 billion in unbacked currency to the money supply. Whatever one has saved for retirement will be buy less when it's spent. The kindest cut would be to balance the budget by reducing spending and taxes. If we weren't facing massive inflation, with rising energy costs (no oil drilling), increased food costs, and increased taxes, we wouldn't need the non-existant COLA's, or Obama's $250 "gift" of our own money. What we need is govt fiscal responsibility, a decent rate of return on relatively safe investments, and low inflation. Obama's bloated budget will produce just the opposite.