The crippling of the program through misinformation and scare tactics would be a national tragedy. The National Commission on Retirement Policy proposal This plan proposes to eliminate the long-term shortfall in the Social Security fund through large benefit cuts targeted at moderate-income workers.
Even more striking is that Social Security is the only source of retirement income for almost a quarter of elderly beneficiaries.
Aim to allocate 15 percent of your paycheck into retirement savings. Increases of this magnitude would require a doubling of the current savings rate and a corresponding cut in current living standards.
Note that this proposal incorporates only the 0. Increasingly, firms are forcing out workers in their late fifties or early sixties as a way to save money. In addition, the retirement landscape has changed, with fewer people guaranteed pensions.
Several proposals would raise the normal retirement age to 68 by and to 70 by There can also be large differences in benefits between age cohorts if, say, the stock market dropped sharply from one year to the next. Life expectancy is increasing, people are having fewer children and there are more women in the workforce than when the program was created.
It is important that, with all the attention being focused on Social Security, we do not lose sight of the basic facts. Raising the cap to 90 percent would fill an estimated 29 percent of the funding gap.
Many prominent proposals, several of which will be examined in the next section, and much of the public discussion unfortunately rest on misconceptions about the returns that can be expected in the future in the stock market, the potential for raising the retirement age, and the accuracy of the consumer price index.
Congress must take some thoughtful and targeted steps towards long-term solvency in the Social Security program. Furthermore, while there has been a considerable effort to find ways in which the CPI overstates inflation, relatively little time has been spent examining possible sources of understatement.
The evidence mustered by the Boskin Commission and others to argue that the CPI overstates inflation is largely speculative; much of it is based on introspection and guesswork rather than careful research Baker ; Moulton and Moses The plan does include a provision that may increase benefits somewhat for the poorest beneficiaries in that it provides a poverty-level benefit to anyone who has worked for 40 years.
This plan would also raise the normal retirement age to 67 by and index the retirement age to life expectancy in subsequent years, meaning an increase in the normal retirement age of approximately one month every two years.
This proposal, generally known as the Scheiber-Weaver plan after the two members of the council who designed it, calls for placing 5.
Ensure protections for those most in need. The other major misunderstanding underlying proposals to raise the retirement age is the failure to recognize that the decision to retire is often not voluntary. In any system in which Social Security funds or mandated savings accounts are invested in private equities, it will always be possible for political factors to affect investment decisions.
Every vote counts, and together, we the people can hold politicians accountable. The impact of this increase for moderate income workers could be offset through an expansion of the earned income tax credit.
The proposal also raises the age for early eligibility, the option selected by most workers, from 62 at present to 65 by Table 2 shows the distribution of projected benefits for a low, average, and high income worker retiring at age 65 inwhen the privatized system will have been fully phased in.
Apply the payroll tax to salary reduction plans, such as health savings accounts or flexible savings accounts. Social Security has promised more benefits than it can afford to pay in the future.
The main impact of this provision will likely be to replace Supplemental Security Income benefits that are financed through general revenue with a minimal Social Security benefit that is financed through the less-progressive payroll tax.
The difference for a long-term investor is enormous. Combining these two effects means that projections for the average return on stocks over the next 75 years should be reduced by approximately 3.
Use the chained consumer price index that results in annual benefits increases that are about 0. It is fair for top earners to pay more into Social Security, and they would get a bit more in benefits. This change means that, if the old CPI would have measured a 2.
For many workers, particularly women who have spent several years out of the labor force raising children, this change in the formula will add five years of zero earnings. In reality, most workers will earn much less early in their life and far more in their later years.AARP has been fighting for 60 years — and will continue to lead the charge — to keep Social Security viable for current and future generations.
While the program remains secure today, it needs modest changes to ensure that future generations will get the benefits they’ve earned.
Social Security has been an enormously successful program. Over the last 60 years it has lifted tens of millions of retired and disabled workers and their families out of poverty, and it provides the core income that allows workers to enjoy a dignified retirement without burdening their children or the public welfare.
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Save for retirement by implementing an investment plan that meets your specific goals. The future of Social Security is bleak, leaving many worried.
“Benefits are not paid from savings but by taxing younger generations to support older ones,” says Blahous. United States. Previous generations could rely on company pension plans, Can You Really Rely on Social Security in Retirement?