Oh, Good Grief !

[Andy the Actuary]

The National Academy of Social Insurance writes, "The Social Security legislation of 1983 achieved the important goal of remedying a short-term financing crisis and keeping the program solvent. But for the long term, it scheduled far more in benefit cuts than in new revenues for the 21st century. Those benefit cuts are only beginning to be felt. People reaching age 65 in 2025 will get retirement benefits for the rest of their lives that are about 19 percent lower than they would have been without the 1983 reductions."

Whine, whine, whine. 42 years advance notice seems more than adequate. Moreover, the SSA each year mails to prospective recipients a history of earnings and projected benefits. Nothing has been swept under the table.

[GMK]

But for the long term, it scheduled far more in benefit cuts than in new revenues for the 21st century.

From what I've read, it was more like 50/50 in revenue increases and benefit cuts. But I never did catch on to the new math.

And their solution only makes "modest improvements" for some. It doesn't bring back the 19% "benefit loss."

"The report finds that by adopting a balanced long-term revenue plan it is possible to cover the projected shortfall facing Social Security while making modest improvements in the program for three vulnerable groups – low-paid workers, the oldest beneficiaries and students who lose parental support due to death or disability. The revenue plan could include gradually lifting the cap on FICA payroll tax contributions to again cover 90 percent of earnings as Congress intended and scheduling small FICA rate increases over 20 years starting in 2015."

If you take a walk, I'll tax your feet.

[masteff]

"People reaching age 65 in 2025 will get retirement benefits for the rest of their lives that are about 19 percent lower than they would have been without the 1983 reductions."

Wonder if that is before or after the fact that normal retirement age is 67 in 2025? Or is that the majority of the reduction to which they're alluding.

[mbozek]

"People reaching age 65 in 2025 will get retirement benefits for the rest of their lives that are about 19 percent lower than they would have been without the 1983 reductions."

Wonder if that is before or after the fact that normal retirement age is 67 in 2025? Or is that the majority of the reduction to which they're alluding.

The "19%" reduction in benefits is based on the difference in SS benefit % (not actual $) at age 65 for an employee born in 1960 who will retire in 2025 to one born in 1936 who retired in 2001 and is derived from 3 components: 13.3% reduction in benefits (6.66% reduction for each years early retirement before 67), 5.1% income tax on SS benefits and 1.4% for the loss of first year COLA at 65 which was moved back from June 1 to Dec 1 in the year age 65 is attained. The three figures are multipled by each other so as to come up with a combined reduction factor of 19% in 2025.

Of course there are several factors that will affect the reductions. For example, anyone attaining 65 in 2011 will only have a benefit reduction of 6.66% and two thirds of SS beneficaries were not subject to income tax in 2010. For these retirees the reduction in benefits is about 8% at 65.

As previoulsy noted the changes in SS benefits were effective 27 years ago and everone can get a free estimate from SS of benefits at their full retirement age by going online at SS.