December 21, 2016 — Almost everybody agrees Social Security needs some tweaking to keep this popular program running smoothly. After all the latest estimates are that, if no changes are made, starting in 2034 only 75% of promised benefits will be able to paid (Social Security Trustees Annual Report).
Politicians and economists have been talking about the need to fix Social Security for years, but up until now no one has done more than talk. Finally, at least one person in Congress, Rep. Sam Johnson (R-TX), has proposed something. We don’t agree with a lot of what is in his plan, but we salute him for at least proposing something. The Bipartisan Policy Center has also proposed solutions, some similar to Johnson’s and some different. Soon to be President Trump said during the campaign that he wouldn’t cut Social Security benefits, although judging by Rep. Johnson’s bill, the Republican majority in Congress might have other ideas. Who knows who how this will work out – stay tuned.
A few highlights
Johnson’s plan has many facets, and almost each one is guaranteed not to be liked by someone (or liked by someone else). Johnson’s 15 point program would, over a long time span, do some of these things:
– Increase the Normal (Full) Retirement Age to 69 for those hitting age 62 by 2030
– Make adjustments to benefits to slightly favor lower earners and those who have 35 years of earnings, while decreasing benefits slightly for higher earners
– Change to chained-weighted CPI for COLAs and eliminate COLAs for higher earners
– Eliminate the earnings test for those under the Normal Retirement Age
– Eliminate taxation of Social Security benefits
– Provide a lump sum settlement for people who agree to postpone their retirement benefits
– Unlike the plan from the Bipartisan Policy Center, it does not increase the taxable base for higher earners or the base tax rate paid by everyone. The BPC recommended taxing all benefits paid to higher earners.
Early criticism of Johnson’s plan centers around several issues. One is that his plan is not particularly progressive – higher earners are not being asked to pay more and over the long term below average earners will get less. The other is that it mostly cuts benefits with only a slight increase in revenues, the result will be harsher than it has to be for most recipients.
Johnson’s proposed changes are too extensive to discuss here, but these articles that will give you more details – CBSNews.com and the most recent issue of Retirement Weekly by MarketWatch (requires a paid subscription but worth it for people seriously interested in retirement issues).
This is very early in the game for Social Security changes – our new President hasn’t been inaugurated and the new Congress hasn’t been sworn in yet. Whatever happens eventually will probably be very different from what is proposed now. But what is important as a citizen and a current or future Social Security recipient is that you pay attention to the debate. And if you don’t like what you see, let your opinions known.
We just read AARP’s position on Social Security reform and think that their principles are in the right direction.