Social Security Benefits: 17% Pay Cut for Retirees Next Year?
New Bill Could Cut Social Security Benefits
President-elect Donald Trump promised not to cut social security benefits, but Republicans may have other plans.
On Thursday, Congressman Sam Johnson released a bill to reform Social Security. In order to close the program’s funding gap, the chairman has proposed raising the retirement age, reducing cost-of-living adjustments, and cutting Social Security benefits for most recipients. (Source: “Sam Johnson Unveils Plan to Permanently Save Social Security,” Sam Johnson web site, December 8, 2016.)
To make the bill more palatable, Johnson wants to raise the minimum benefit for low-income retirees. He also suggests eliminating income taxes on Social Security benefits.
“My commonsense plan is the start of a fact-based conversation.” Johnson said in a statement. “I urge my colleagues to also put pen to paper and offer their ideas about how they would save Social Security for generations to come. Americans want, need, and deserve for us to finally come up with a solution to saving this important program.” (Source: Ibid.)
If approved, retirees would see drastic cuts to their income.
Johnson’s plan calls for raising the retirement age from 67 to 69 for those born in 1968 or later. He would also peg cost-of-living adjustments to a slower-growing price index. None of these proposals, though, would have a large impact on retirees drawing from the program today. (Source: “Financial Effects on Social Security of H.R. 6489,” Social Security Office of the Chief Actuary, December 8, 2016.)
A 65-year-old claiming Social Security benefits in 2030, assuming average annual earnings of $49,000 over 30 years of covered employment, would see their income cut 17% compared to the current program. The same 65-year-old claiming benefits in 2050 would see their income drop 28%.
Any bill, though, is a long way from becoming law. Representative House Speaker Paul Ryan has stated his focus is on repealing “Obamacare.” President-elect Trump promised not to cut benefits, though he has made no recent comments.
The timing of the release also suggests that Johnson is merely testing the political waters for reform. But depending on the reaction to his plan, today’s announcement could trigger big changes to the program.