Key developments on divesting Michigan investments in Russia, the invasion’s impact on inflation, and Social Security proposals boosting benefits.
Inflation Update — Before the Russian invasion of Ukraine, the forecast of the national economy was looking up. For example, hiring sped up as employers added 678,000 jobs in February amid declines in COVID cases that brought back customers and workers. This job growth exceeded economists’ expectations and left the number of jobs just 2.1 million less than pre-pandemic levels. Despite this rosy job growth, retirees were concerned about the impact inflation was having on their purchasing power. Then Russia invaded Ukraine. While the world-wide repercussions of the Ukraine war are hard to predict, the general consensus is that it will push inflation even higher but isn’t likely to result in a U.S. recession. The Russian invasion and the loss of Russian oil exports have already resulted in a sharp increase in gasoline prices, due to the scarcity of oil on the world market. Pundits say this is the price we pay for supporting democracy.
Dump Russian Investments — In response to the Russian invasion of Ukraine, Michigan’s Governor Whitmer has asked State Treasurer Eubanks to call on the State of Michigan Investment Board (SMIB) to divest the State of Michigan Retirement Systems pension plans from any investments in institutions or companies headquartered in Russia or that have their principal place of business in Russia. The SMIB has scheduled this meeting on March 9. Governor Whitmer has also asked the Treasurer, as the fiduciary over State trust funds, to do the same for other Russian holdings. Michigan is in keeping with other states like Connecticut, that have also taken action to divest state investments.
Russian Share — Divesting is more of an act of solidarity with Ukraine, as our pensions don’t have much of an investment in Russia. The State of Michigan Retirement System has only 0.06 percent of its overall portfolio in holdings that are associated with Russian companies. These investments are not owned by the State’s retirement system. They are managed by external managers and primarily invested in international stock indexes and mutual types of funds.
Michigan Legislature — The Senate passed Resolution 111 which calls on the United Nations, as well as the world community, to unite in sanctioning Russia. The Michigan House has adopted a companion resolution, “to condemn the Russian invasion of Ukraine in the strongest possible terms.” To support the Ukrainians, Michigan state lawmakers, are urging the Michigan Liquor Control Commission, that regulates our State’s liquor sales, to stop buying Russian-made spirits like vodka. Similarly, states that are either boycotting or moving to stop the purchase of Russian alcohol like vodka include: Iowa, New Hampshire, North Carolina, Ohio, Pennsylvania, Utah, and Virginia. These actions are mostly symbolic as U.S. imports only represent about 1.2 percent of its vodka from Russia.
Michigan Automakers — General Motors (GM) is suspending business to Russia, although GM’s presence in Russia is small, selling just about 3,000 Cadillacs yearly, with no manufacturing plants. Ford has a 50 percent stake in three plants in Russia and is concerned for the safety of its people there.
Social Security (SS) Proposals — As part of Women’s History Month in March, we recognize the importance of women in the workforce and reflect on their financial security in retirement. Women tend to live longer than men, but earn less income over their lifetime due to pay inequity while working. In addition, women have lower earnings due to the time spent at home taking care of their children and elderly parents. These factors reduce their SS benefits in retirement. For women to get the retirement income they deserve, changes are being proposed to the SS system based on work spent at home, in the workforce, or both. These SS proposals, discussed below, are gender neutral as some men face challenges similar to women in the work force.
SS Survivors Benefits — The economic security of married women is also adversely impacted when their family SS benefits fall significantly after their husband passes. Survivor benefits were established in 1939 to cushion the loss of income when a spouse dies. But they are no longer adequate for widows and widowers. Finances dwindle due to sluggish wage growth, inadequate retirement savings, and the loss of employer-provided pensions. When your spouse passes, the total family benefits plummet, but fixed household expenses usually do not. The mortgage or rent, utilities, insurance, and car payments are not cut in half. Women live longer than men so they are the ones who usually face the difficulty of making ends meet on much lower incomes. It’s not likely that surviving spouses will ever get their own SS benefits plus that of their deceased spouse. But, a new legislative proposal, discussed below, ensures that widows and widowers maintain at least 75 percent of their combined benefits that they would have received when both spouses were alive.
Social Security 2100: A Sacred Trust — This bill (H.R. 5723) was introduced in the U.S. House of Representatives by Rep. John Larson and is expected to be marked up this March with a vote targeted for May. You can help by urging your member of Congress to support this bill. It proposes to make SS benefits more adequate for all. Significant improvements include:
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