The NYT offers an editorial on what is becoming mainstream thinking on What’s Next for Social Security? Of course the writing is still short on pointing to the thoroughly researched possibilities for adjusting the program for changing circumstances.
The trustees of Social Security recently reported that the retirement system can pay full benefits until 2035, when it will be able to pay about three-fourths of promised benefits. That is not a crisis. It is a manageable problem.
The system needs to be restored to long-term health, but policy makers must realize that broad-based benefit cuts are not really a viable option.
The focus on benefit cuts also conveniently ignores the fact that benefits are already shrinking. Under current law, benefits are being reduced by the higher retirement age, which has been gradually rising from 65 to 67 for those born in 1960 or later. That translates into lower monthly benefits for those who retire at 65 or fewer years of benefits for those who work until 67. For example, a worker entitled to a $1,000 monthly benefit upon retirement at age 67 will get only $867 if he or she retires at 65.
Benefit checks are also being reduced by higher Medicare Part B premiums, which are deducted from Social Security benefits. The premiums are set to rise from 5 percent of benefits, on average, for those retiring in 2002 to 9.5 percent for those retiring in 2030. And if you factor in rising co-payments on health care services, most retirees already face living on less.
Taxes further erode benefit payments because the levels at which benefits become taxable — generally, $25,000 for individuals and $32,000 for couples — have never been adjusted for wage growth or inflation. By 2030, more than half of recipients will owe tax on a portion of their benefits, compared with 10 percent when the taxes were first imposed, in 1984.
The upshot is that under current law, Social Security benefits will replace 31 percent of the typical retiree’s preretirement earnings in 2030, compared with 42 percent as recently as 2004, according to the Center for Retirement Research at Boston College.