The Ryan Plan to Cut Social Security
The Center on Budget and Policy Priorities takes a close look at Rep. Paul Ryan’s plan for cutting Social Security. Pointing out that the average Social Security retirement benefit is around $14,000 per year, they go on:
Starting from this modest base, Rep. Ryan’s Social Security plan would cut benefits for future retirees significantly in two ways: (1) reducing benefits for the top 70 percent of wage earners through price-indexing the benefit formula, and (2) reducing benefits at all earnings levels by further increasing Social Security’s full retirement age.
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Rep. Ryan’s indexing proposal imposes the greatest reductions on those with the highest earnings, and it exempts those with the very lowest earnings, so it is sometimes called “progressive” price indexing. Nonetheless, it would affect fully 70 percent of all Social Security beneficiaries — everyone with earnings above $22,000 in today’s terms. Over time, price indexing would turn Social Security into a program that provides only a small retirement benefit — and one that is largely unrelated to prior earnings.
The second benefit reduction is an increase in Social Security’s full retirement age. The full retirement age was 65, is now 66, and will reach 67 for people born in 1960 and later. Rep. Ryan’s plan would accelerate the increase to 67 and would index the full retirement age to life expectancy thereafter. As a result, the full retirement age would reach 68 for people born around 1983 and higher ages for later cohorts. As shown in Table 1, an increase in the full retirement age amounts to an across-the-board cut in benefits. A one-year increase in the full retirement age is equivalent to a roughly 7 percent cut in benefits for a person retiring at any given age, whether a person retires at age 62 or works to age 70 and does not begin drawing benefits until then.
The report goes on and it doesn’t get any better. Like private accounts that only benefit high earners, while harming Social Security as a whole.
This is the kind of stuff we’re up against over the next year or so. And what’s especially frustrating is, there is no Social Security crisis.
Tags: social security
It only gets scary when they talk about moving up the age (62) when you can start to draw.
Do the math: If you start at 62 your checks will be smaller (that part is true), and the longer you wait the bigger the check will get (that is true also). If you think this is a no brainer, they have fooled you again.
If you look at the difference in the number of checks that you will get between 62 and 70 it comes out to 96 paydays. Looking at how the one party wants to change this, it will most likely make it even more tilted against when you do start.
I worked out a spread sheet that I can input the numbers to show how much you actually lose and how many years after 70 you would have to live in order to break even. It will make you rethink about that no brainer.
While your age 62 checks will be smaller, you will get a whole lot more of them. It works out for most folks that they would have to live into their late 80’s in order to get the same amount of money.
Do your own math and make your own decision, let Paul Ryan make his own.
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