High-end Social Security Benefits Coming Under Fire? - pressreader.com; CRFB.org; AMAC
As anticipated, the rapidly approaching depletion of Social Security’s trust fund reserves is bringing a variety of viewpoints into focus. Wth just six years remaining on the countdown clock, it’s not unexpected that the pace of suggestions for fundamental program changes will increase as Congress grasps the proximity of Social Security’s insolvency. One such structural modification emerged yesterday in a Washington Post editorial opinion posted at pressreader.com, titled “Nobody needs over $100,000 per year in Social Security benefits.”
The op-ed advances the notion of capping benefits for the wealthiest recipients, following the Committee for a Responsible Federal Budget’s lead…a proposal to place a ceiling on the maximum benefit available to individuals and married couples. CRFB, in a March 24 post on their website, outlined a proposal for a “Six Figure Limit (SFL) that would set a $100,000 cap on the total benefit a couple retiring at the Normal Retirement Age (NRA) can receive starting this year. The SFL would be adjusted based on marital status and claiming age, with a $50,000 limit for a single retiree collecting at the NRA.”
CRFB’s suggestion of the SFL concept is offered for lawmakers’ consideration as they develop a Social Security reform package. Although not recognized as a full solution to the insolvency issue, CRFB projects that the SFL would “…close between one-fifth and one-half of Social Security’s 75-year shortfall and reduce one-quarter to three-fifths of the program’s annual deficits by 2099.”
A Targeted Solution to a Program Imbalance
The CRFB proposal puts a fine point on a frequently expressed concern over Social Security’s drift away from its initial premise of preventing old-age poverty among the most vulnerable (see yesterday’s headline post on this website). It’s a bit of a dichotomy, perhaps, since another Social Security premise is that its social insurance aspect should represent an earned benefit based on tax contributions during a career of employment.
As explained in yesterday’s post, the AMAC Social Security Guarantee (SSG) contains several key recommendations that would work in a similar direction. First, the SSG proposes a change to the annual cost-of-living adjustment (COLA) process that would redistribute annual COLA dollars to award a higher benefit increase to those with monthly benefits below the average. For seniors remaining in or reentering the workforce, the SSG recommends eliminating the “Retirement Earnings Test” to enable those who’ve claimed benefits before their full retirement age to either earn more or save more. The SSG also includes recommendations to improve survivor benefits for lower-income households and, for those years away from benefit eligibility, recommends enhanced savings opportunities to build wealth.
The SSG addresses the $25 trillion 75-year shortfall by curtailing benefits for some future retirees, but these changes are targeted only at higher earners and include provisions to shield lower earners from the impact. Also, the SSG recommends no increase in the payroll tax, a provision that would benefit low-wage earners proportionally.
What the Future Holds
The timeline for Congress to focus on Social Security’s plight is uncertain, of course, but what is known is that the rate of trust fund depletion is accelerating. From a $41 billion deficit in 2023 to a $67 billion deficit in 2024 and an estimated $160 billion deficit in 2025, many informed voices have suggested full depletion by 2032.
So, what will happen, and when it will happen, is anybody’s guess at this point. But rest assured, the public’s attention to the problem will likely continue to increase as more and more current — and future — Social Security participants become aware of what’s in store. Stay tuned to this website for updates on this evolving situation.