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The Future of Social Security: 12 Proposals You Should Know About

Pros and cons of options on the table in Washington

Begin Longevity Indexing

If, as projected, Americans continue to live longer from one generation to the next, individuals will, on average, receive Social Security benefits for a longer period of time. The trend contributes to Social Security’s funding gap, and one option to offset it is longevity indexing. Indexing would automatically modify Social Security to pay smaller monthly benefits as lifespans increase. Reducing the monthly payments could be accomplished either by increasing the age at which a person becomes eligible for full, unreduced retirement benefits (full retirement age) or by changing the benefit formula. Depending on the specific proposal, this is estimated to fill 20-26 percent of the funding gap. Indexing the full retirement age for longevity is estimated to increase it by one month every two years. Each year that the full retirement age increases there is about a 6 to 8 percent reduction in monthly benefits for any given age at which benefits are claimed.

PRO: Indexing the Social Security retirement age is a fair way to handle the fact that Americans are expected to live longer in the future. Assuming lifespans continue to increase, this method would increase Social Security’s full benefits age by about one month every two years; if it started in 2025, the retirement age would increase from 67 to 68 by about 2049. This increase does not necessarily mean that someone would have to retire later. The alternative is a very slightly reduced monthly benefit. The individual retiree would have this information in plenty of time to decide which approach to take. (David John, Heritage Foundation)

CON: To index benefits for longevity would unfairly cut benefits for almost everyone. Low-earning workers and other disadvantaged groups have seen little or no gains in longevity. Cutting benefits for everyone just because well-off Americans are living longer would be profoundly unjust. Moreover, this change would violate the purpose of Social Security, which is to ensure basic economic security. Rent, utilities, groceries and medical care don’t cost less just because some people are living longer. (Virginia Reno, National Academy of Social Insurance)

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