Legislative changes to the Social Security program made in 1983 provided short-term relief to a pending financial crisis, but did not offer a sustainable long-term solution, says a Social Security Brief from the National Academy of Social Insurance (NASI). The brief says the three key changes made in 1983 will result in a 19% decrease in benefits for those who retire in 2025, and although more cuts are called for, NASI says this is unnecessary to preserve the future of the system.
A survey included in the brief shows that 87% of all Americans agree that they don’t mind paying for Social Security because of the security and stability it provides to millions of retired and disabled Americans and children and widowed spouses of deceased workers, and 79% of those aged 18-34 expressed a willingness to increase workers’ contributions to Social Security in order to preserve it for future generations. The changes made in 1983 shifted the age of retirement from 65 to 67, subjects up to half of Social Security benefits to taxation in certain income brackets, and delays the cost of living adjustment (COLA).
Moving the age of retirement for full eligibility to 67 for workers born after 1959 will yield only 86.7% of benefits that someone who retired at age 65 would receive, a 13.3% cut. Another 5.1% decrease comes from taxing up to half of a retired couple’s income if it exceeds $32,000, and taxing up to half of single seniors’ incomes that are more than $25,000; the revenue from these taxes is put back into the Social Security trust funds. The third change has to do with shifting a retiree’s first COLA to December of the year they reach retirement age, rather than June; in the future, this will result in an estimated 1.4% reduction in net benefits, for a total of 19%.
The Bipartisan Policy Center’s Debt Reduction Task Force called for more cuts to the program in November 2010, but NASI says this could jeopardize the financial security of many of America’s elders, as Social Security will be their only source of retirement income that is unaffected by the stock market and that provides lifetime benefits fully protected against inflation.
Instead, NASI includes three proposals to improve social security benefits: Update the special minimum benefit to ensure that low-income workers can retire at age 62 after 30 years of work without facing the prospect of impoverishment; restore benefits for children of disabled or deceased workers until age 22 while they are in college or vocational school; and improve benefits for the oldest old.
It also recommends a long term revenue plan to prevent cutting benefits that includes preserving trust fund reserves, which would serve to maintain interest earnings as a permanent source of trust fund income. This, according to NASI, is preferable to exhausting those reserves and raising contribution rates higher than what would have been necessary had the reserves and interest income remained stable. These options include scheduling future FICA increases and dedicating more progressive revenues to Social Security.
View the brief here.
Written by Alyssa Gerace