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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

Reduce Benefits for Higher Earners

Social Security benefit payments are based on the portion of a worker’s earnings that was subject to Social Security payroll taxes. While higher lifetime earners receive higher payments than lower lifetime earners, their benefits replace a smaller share of their past earnings than do the benefits provided to lower earners. One option to help close Social Security’s funding gap would be to reduce benefits for higher lifetime earners. This could be done by modifying Social Security’s benefit formula in a number of ways, depending on who is classified as higher earners and how much their benefits are reduced. Most options use a sliding scale to reduce the benefits most for higher earners, make smaller changes for middle earners and make no benefit changes for lower earners.

Options include:

  • Reduce benefits for the highest-earning 25 percent. Gradually reducing benefits over time for the highest-earning 25 percent of individuals by a sliding scale up to a 15 percent benefit reduction for maximum earners is estimated to fill 7 percent of the funding gap.
  • Reduce benefits for the highest-earning 50 percent. Gradually reducing benefits over time for the highest-earning 50 percent of individuals by a sliding scale up to a 28 percent benefit reduction for maximum earners is estimated to fill 31 percent of the funding gap.

PRO: In coming years, when Social Security won’t have enough payroll tax money to pay full benefits to everyone, it seems only fair to pay full benefits to lower-wage workers and lower benefits to those who had higher earnings. Wealthier retirees have other ways, such as pensions and savings, to fund their retirements. They don’t need full benefits. Everyone would still receive a benefit, but higher-earning retirees would receive less than they do now. (David John, Heritage Foundation)

CON: These proposals would actually cut benefits for middle-class workers making as little as $35,000 a year. They are not “high earners.” Benefits are already modest. Retirees’ health care costs are rising while other retirement resources —– home equity, pensions, lifetime savings —– are at risk or unavailable for too many Americans. Most seniors get most of their income from Social Security. Cuts are not the answer. We can afford to preserve Social Security’s promised benefits. (Virginia Reno, National Academy of Social Insurance)

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