Social Security
solutions
We desperately need to follow the advice of The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform.
In December 2010, the Obama administration released The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform, a report that the president and the leaders of both major parties commissioned to address our nation’s fiscal challenges. The Commission is sometimes called Simpson-Bowles in a reference to its co-chairs Senator Alan Simpson (former Republican Senator from Wyoming) and Erskine Bowles (Chief of Staff to President Clinton).
The Commission had 18 members and an executive director appointed by President Obama. Members included six members of the U.S. House of Representatives and six members of the U.S. Senate. They said this in the report (remember this was 15 years ago, so we have already lost A LOT of time!):
“Unless we act, immense demographic changes will bring the Social Security program to its knees. Without action, the benefits currently pledged under Social Security are a promise we cannot keep. Today, the program is spending more on beneficiaries than it is collecting in revenue. Unfortunately, the default plan in Washington is to do nothing. The do-nothing plan would lead to an immediate 22 percent across-the-board benefit cut for all current and future beneficiaries in 2037. Over the next 75 years, the program faces a shortfall equal to 1.92 percent of taxable payroll. Seventy-five years from now, that gap will increase to 4.12 percent of payroll. The Commission proposes a balanced plan that eliminates the 75-year Social Security shortfall and puts the program on a sustainable path thereafter.”
“To save Social Security for the long haul, all of us must do our part. The most fortunate will have to contribute the most, by taking lower benefits than scheduled and paying more in payroll taxes. Middle-income earners who are able to work will need to do so a little longer. At the same time, Social Security must do more to reduce poverty among the very poor and very old who need help the most.”
Make the retirement benefit formula more progressive.
Modify the current three-bracket formula to a more progressive four-bracket formula, with changes phased in slowly. Change the current bend point factors of 90%|32%|15% to 90%|30%|10%|5% by 2050, with the new bend point added at median lifetime income.
Reduce poverty by providing an enhanced minimum benefit for low-wage workers.
Create a new special minimum benefit that provides full career workers with a benefit no less than 125 percent of the poverty line in 2017 and indexed to wages thereafter.
Enhance benefits for the very old and the long-time disabled.
Add a new “20-year benefit bump-up” to protect those Social Security recipients who have potentially outlived their personal retirement resources.
Gradually increase early and full retirement ages, based on increases in life expectancy.
After the Normal Retirement Age (NRA) reaches 67 in 2027 under current law, index both the NRA and Early Eligibility Age (EEA) to increases in life expectancy, effectively increasing the NRA to 68 by about 2050 and 69 by about 2075, and the EEA to 63 and 64 in lock step.
Give retirees more flexibility in claiming benefits and create a hardship exemption for those who cannot work beyond 62.
Allow Social Security beneficiaries to collect half of their benefits as early as age 62, and the other half at a later age. Also, direct the Social Security Administration to design a hardship exemption for those who cannot work past 62 but who do not qualify for disability benefits.
Gradually increase the taxable maximum to cover 90 percent of wages within 40 years.
Adopt improved measure of CPI.
Use the chained CPI, a more accurate measure of inflation, to calculate the “Cost of Living” Adjustment for Social Security beneficiaries.
Cover newly hired state and local workers after ten years of implementation.
After 10 years, mandate that all newly hired state and local workers be covered under Social Security, and require state and local pension plans to share data with Social Security.
Direct SSA to better inform future beneficiaries on retirement options.
Direct the Social Security Administration to improve information on retirement choices, better inform future beneficiaries on the financial implications of early retirement and promote greater retirement savings.
Begin a broad dialogue on the importance of personal retirement savings.