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Understanding the Social Security 'Notch'

What Is the Social Security 'Notch'?

The "notch" is a term some people use to describe Social Security benefits received by people born from 1917 through 1921. Some beneficiaries in this group believe that they are not getting fair Social Security benefits when compared with those born before or after them. 

What Caused the 'Notch'?

In 1972, a law was passed that provided automatic cost-of-living adjustments (COLAs) to ensure that Social Security benefits would keep up with inflation. However, the formula created to determine the inflation adjustments was flawed, and benefit levels rose faster than inflation. People born in 1912 through 1916, who began to collect retirement benefits before Congress corrected the formula, accidentally received a windfall—or at least more than Congress had intended.

Five years later, in 1977, Congress passed another law repairing the flawed formula. In doing so, Congress concluded that those who had inadvertently benefited would face hardship if they suddenly received lower Social Security payments. Congress was also concerned about the impact of sudden change on people nearing retirement. Therefore, the 1977 law required the reductions in the overpayment to be phased in gradually over five years. A lower payment level took effect each year, but only for new beneficiaries who were just starting to receive benefits. No changes were made to anyone already receiving benefits.

Gradually, recipients' starting benefits were reduced each year, as people born in 1917 through 1921 retired. Overpayments slowly ended. Payments were returned to the intended level for people born after 1921. When the correcting legislation was passed in 1977, the people in the "notch" would have been age 56 through 60, still a few years from retirement. So, it was judged fair to phase the correction through that five-year age group. Everyone born after 1921 has benefit levels calculated as Congress directed in 1977, with no windfall included.

Are People in the 'Notch' Receiving Lower Benefits Than Other Retirees?

Although we often see and hear misinformation about this complex matter, no beneficiary is receiving less than what was originally intended. Some people in the "notch" group believe that they are not getting proper Social Security benefits when compared with those born before them. Instead, it is people born before 1917, whose benefits were calculated under the flawed formula, who are receiving somewhat more than intended.

What Is AARP’s Position on the 'Notch'?

In 1994, a special Commission on the Social Security "Notch" was appointed to reconsider the matter thoroughly. The Commission found that benefits paid to those in the "notch" years are fair and that Congress acted responsibly in 1977 to adjust the flawed formula. After carefully monitoring the Commission’s process, AARP accepted the findings.

Legislative Proposals on the 'Notch'

Legislative proposals to raise benefits for thousands of people born in 1917 through 1921 would create an additional burden to Social Security’s long-term financing by using trust-fund reserves scheduled for future generations of retirees. Of course, this would be done without question if it were necessary to right an injustice. However, raising benefits for the current “notch” age group only prolongs the accidental windfall and would, in the end, create a new group with the same adjustment problem. Legislative proposals to address the "notch" have little likelihood of enactment.

Consumer Advice
You may be contacted to make a donation to an organization working on the Social Security "notch" issue. AARP urges members to be as informed as possible when deciding whether to contribute to any organization. If you have never heard of the group before, or if you know very little about it, we encourage you to be cautious before contributing.
If an organization solicits you for money, remember that you have every right to request a copy of its financial statement before making a contribution.


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