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Given the fiscal challenges facing Social Security, Nokia employees must plan for retirement - and have a strategy that supplements Social Security benefits - to ensure long-term financial security, 'he said.
But Nokia employees need to assess their retirement goals now and take advantage of tax-advantaged savings as future adjustments to Social Security benefits could affect their retirement income.'
In this article, we will discuss:
1. Social Security finances are changing because of demographic changes.
2. Solving Social Security's long-term funding shortfall.
3.Impact of COVID-19 pandemic on Social Security and increased benefits.
Social Security is pay-as-you-go; meaning today's workers are paying taxes on today's retirees' benefits. Yet demographic trends like lower birth rates, higher retirement rates, and longer life spans in your area create long-term fiscal challenges. And there are simply not enough U.S. workers to help the growing beneficiaries. Social Security is not collapsing, but the clock is ticking on whether the program can pay full benefits - something Nokia employees and retirees need to know.
The Trustees of the Social Security Trust Funds annually report to Congress on the program's financial health and outlook. The Trustees estimated in the latest report, released August 2021, that the retirement program will have funds to pay full benefits only through 2033 unless Congress acts to shore up the program. Those days of reckoning are expected one year earlier than originally anticipated, thanks to the economic fallout of the COVID-19 pandemic.
Report Highlights
Social Security has two programs, each with a trust fund in which are deposited payroll taxes collected to pay benefits. Older workers, their families, and Survivors of Workers receive monthly benefits through the Older Age and Survivors Insurance (OASI) program; disabled workers and their families receive monthly Disability benefits through the Disability Insurance (DI) program. The combined programs are called OASDI.
Combined OASDI costs are expected to exceed total income (interest included) by 2021, and the Treasury will tap reserves to pay benefits. Trustees project that combined reserves will be exhausted by 2034. Afterwards, payroll tax revenue alone should cover about 78% of scheduled benefits. OASDI projections are hypothetical because the OASI and DI Trusts are separate entities, and generally, the taxes and reserves of one program cannot fund the other program.
If treated separately, the OASI Trust Fund would be drained by 2033. Payroll tax revenue alone would then cover 76% of OASI benefits.
The DI Trust Fund will be exhausted by 2057 - eight years earlier than estimated in last year's report. When that trust fund runs dry, payroll taxes alone would pay 91% of scheduled benefits.
We remind Nokia employees and retirees that all projections are based on current conditions, which are subject to change and may not occur.
Proposed Fixes
Trustees want Congress to act soon on the financial problems these programs face so solutions can be less drastic and can be phased in gradually to minimize public impact. Combining some of the following solutions may also soften the effect of one solution.
Raise the existing Social Security payroll tax rate of 12.4%. The employee pays half and the employer pays half (self-employed pay the full 12.4%). An immediate and permanent payroll tax increase of 3.36 percentage points to 15.76% would be needed to meet the long-range revenue shortfall (4.20 percentage points to 16.60% starting in 2034).
Placing a ceiling on wages subject to Social Security payroll taxes (USD 142,800 in 2021) or raising it to zero (USD 142,800 in 2021).
The full retirement age should be raised to 67 for anyone born 1960 or later.
Reducing future benefits. For the long-term revenue shortfall, scheduled benefits would have to be cut by about 21% for all current and future beneficiaries - or by about 25% if reductions were made only for those first becoming eligible for benefits in 2021 or later - immediately and permanently.
The benefit formula that is used to calculate benefits should be changed.
The annual cost-of-living adjustment for benefits is calculated differently.
Pandemic Impact
The 2021 Trustees Report says the pandemic and the severe but short-lived recession in 2020 threw a wrench into Social Security's short-term finances. Employment, earnings, interest rates, and GDP [gross domestic product] all dropped sharply in the second calendar quarter of 2020 and are assumed to rise gradually thereafter towards a recovery by 2023, with worker productivity and thus GDP to be permanently lowered by 1%. Projections also included higher mortality rates for 2020-2023 and delays in births and immigration. Because payroll taxes are rebounding rapidly, the program was not as badly damaged as many feared.
Sharp increases in consumer prices in July and August suggest beneficiaries could face the highest annual benefit increase since 1983 beginning in January 2022. Social Security Administration chief actuary estimates that the 2022 cost-of-living adjustment (COLA) will be close to 6.0% (The official COLA had not been announced as of this writing).
So what's at risk for you?
In all, COVID-19 may have forced some 2.8 million Americans older than expected to file for Social Security benefits earlier than expected because of older workers at Nokia companies losing their jobs or having health issues, the Census Bureau estimated.
If you regret starting Social Security benefits earlier than expected, you can withhold your application within 12 months of your original claim and reapply later. But you can do this only once, and you must repay all benefits you received. Or if you're fully retired, you can suspend benefits and restart them later voluntarily. Either of these moves would produce a higher future benefit.
Even if you won't need Social Security to live, the benefits could be a good chunk of your retirement income. A rough estimate of your monthly retirement benefit is available on your Social Security Statement - accessible through my Social Security account on SSA.gov - or by registering for my Social Security account. You should start receiving an annual statement by mail if you aren't receiving benefits and haven't registered for an online account.
No matter what Social Security's future holds, you still control your Nokia retirement destiny. But now may be the time to save more for your Nokia retirement while you work at a Nokia company. Wait until you step out the door to think about your retirement income strategy. All information is from the 2021 Social Security Trustees Report except:
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Sources:
1. Munnell, Alicia H. Social Security's Financial Outlook: The 2021 Update in Perspective . Center for Retirement Research at Boston College, Sept. 2021, crr.bc.edu/wp-content/uploads/2021/09/IB_21-15_.pdf .
2. Van de Water, Paul N. What the 2021 Trustees' Report Shows About Social Security . Center on Budget and Policy Priorities, Aug. 2021, cbpp.org/research/social-security/what-the-2021-trustees-report-shows-about-social-security .
3. An Actuarial Perspective on the 2021 Social Security Trustees Report . American Academy of Actuaries, Sept. 2021, actuary.org/sites/default/files/2021-09/2021_SocSec_TrusteeReport.pdf .
4. Johnson, Richard W., and Karen E. Smith. If Social Security Runs Out of Money, Poverty among Older Adults and People with Disabilities Will Soar . Urban Institute, July 2024, urban.org/urban-wire/if-social-security-runs-out-money-poverty-among-older-adults-and-people-disabilities .
5. Wikipedia contributors. Social Security Trust Fund . Wikipedia, last updated Feb. 2025, en.wikipedia.org/wiki/Social_Security_Trust_Fund .
What unique features and benefits does the Nokia Retirement Income Plan offer to its participants, and how can these benefits be maximized by current employees of Nokia of America Corporation? Additionally, what resources are available for employees to educate themselves about the various aspects of the plan, including eligibility, distribution options, and potential tax implications?
The Nokia Retirement Income Plan offers participants a defined benefit plan designed to provide financial security through retirement by supplementing Social Security and other retirement savings. Benefits can be maximized through strategies like ensuring accurate service records, understanding distribution options such as lump-sum payments or annuities, and consulting financial advisors to align these benefits with long-term retirement goals(Nokia of America Corpor…).
How does participation in the Nokia Retirement Income Plan facilitate financial security in retirement for employees, specifically in terms of pension benefit calculations and options such as lump-sum distributions or annuities? Moreover, what are some strategies that Nokia of America Corporation employees can employ to ensure they are fully prepared to utilize their retirement benefits as they transition towards retirement?
Participation in the Nokia Retirement Income Plan ensures financial security in retirement through pension benefit calculations based on service years and salary history. Employees can choose from options like lump-sum distributions or lifetime annuities. By carefully selecting a distribution option and incorporating it into a broader retirement strategy, employees can optimize financial outcomes(Nokia of America Corpor…).
With respect to changes in personal circumstances, such as marriage or divorce, what provisions does the Nokia Retirement Income Plan have to protect the benefits of employees from Nokia of America Corporation? How can employees navigate the complexities of Qualified Domestic Relations Orders (QDROs) within the context of their pension benefits, and what resources are available to assist them in this process?
The Nokia Retirement Income Plan protects benefits in cases of personal changes such as marriage or divorce through provisions like the Qualified Domestic Relations Order (QDRO). Employees can consult the Nokia Benefits Resource Center for assistance in navigating QDROs to ensure a fair division of benefits. Guidance is available for understanding the QDRO requirements and how they apply to their pension(Nokia of America Corpor…).
What steps must employees take to initiate the commencement of their benefits from the Nokia Retirement Income Plan once they reach retirement age? Furthermore, what are the important considerations employees need to keep in mind regarding the selection of a payment form and any potential impact this may have on their overall financial strategy during retirement?
To initiate pension benefits under the Nokia Retirement Income Plan, employees must submit a claim when they reach retirement age. They should consider factors such as payment form options (lump sum or annuity) and the impact on long-term financial plans. Choosing the appropriate payment form is critical to maximizing retirement income(Nokia of America Corpor…).
How can employees of Nokia of America Corporation ensure their beneficiaries are properly designated under the Nokia Retirement Income Plan, and what implications does this designation have for benefit distribution in the event of their death? Additionally, what steps should employees take to update their beneficiary designations in light of significant life events?
Employees can ensure their beneficiaries are properly designated by updating their beneficiary forms through the Nokia Benefits Resource Center. Proper designation affects how benefits are distributed in the event of their death, and it is crucial to update designations after life events like marriage, divorce, or the birth of a child(Nokia of America Corpor…).
In terms of compliance with federal regulations, how does the Nokia Retirement Income Plan adhere to ERISA guidelines concerning employee benefits, and what rights do employees of Nokia of America Corporation possess under these regulations? Also, how can employees exercise their rights effectively if they encounter issues regarding their pension benefits?
The Nokia Retirement Income Plan complies with the Employee Retirement Income Security Act (ERISA), giving employees the right to receive information about their benefits and hold fiduciaries accountable. If employees face issues with their pension, they can exercise their rights through claims and appeals, with recourse available through legal action if necessary(Nokia of America Corpor…).
How does the Nokia of America Corporation support employees who might be eligible for a disability pension under the Nokia Retirement Income Plan, and what specific eligibility criteria must be met? Additionally, what resources are available to assist employees in understanding this facet of their retirement benefits?
Employees eligible for a disability pension under the Nokia Retirement Income Plan must meet specific criteria, such as proving permanent disability before reaching retirement age. Resources like the Nokia Benefits Resource Center can provide guidance on the eligibility process and required documentation(Nokia of America Corpor…).
What specific actions should an employee of Nokia of America Corporation take when applying for a pension benefit under the Nokia Retirement Income Plan, and what documentation is typically required to streamline this process? Furthermore, in the event of a claim denial, what recourse do employees have to challenge the decision through the plan's appeal process?
When applying for pension benefits, employees should provide documentation such as proof of age and employment history. In case of a denial, they have the right to appeal through the Employee Benefits Committee. If necessary, employees can further appeal to federal courts under ERISA(Nokia of America Corpor…).
How does the pension benefit guarantee from the Pension Benefit Guaranty Corporation (PBGC) apply to employees of Nokia of America Corporation, and what are the limitations of this guarantee in protecting retirement benefits? Additionally, how can understanding these protections help employees make informed decisions regarding their retirement planning?
The Pension Benefit Guaranty Corporation (PBGC) guarantees benefits under the Nokia Retirement Income Plan in case the plan terminates. However, there are limitations, such as caps on benefit amounts. Understanding these protections helps employees make informed decisions about their retirement planning(Nokia of America Corpor…).
How can employees contact the Nokia Benefits Resource Center to gain more information about their benefits and the specific resources available under the Nokia Retirement Income Plan? What are the recommended communication channels and hours for reaching out to ensure timely and effective assistance?
Employees can contact the Nokia Benefits Resource Center through the Your Benefits Resources (YBR) website or by calling the designated phone line. It is recommended to use these channels during business hours (9:00 a.m. to 5:00 p.m. ET) for timely assistance with pension-related questions(Nokia of America Corpor…).
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