Huge Cuts: Coming Soon, to Social Security Benefits Near You
December 6, 2010 - 12:45pm ET
Are you 55 now? What about 45? Or 25? Do you have any children who are toddlers? Because the younger you are, the more drastically your benefits would be cut under the Fiscal Commission's recommendations. Middle-class workers retiring at age 65 would see cuts of up to 41.5% from what they are entitled to under current law.
At the Strengthen Social Security campaign we made two graphs demonstrating how the Fiscal Commission's final proposal would affect typical earners at all ends of the spectrum. The results are devastating. If you are not shocked, you are not looking closely enough. Check it out below, or click here for the graphs, explanatory note and underlying data all in one file.
Below is a breakdown of the most egregious cuts and how they would damage the fundamental character of the program.
The December 3, 2010 Bowles-Simpson proposal would inflict major cuts on the middle-class:
- A 25 year-old medium-income worker who retires in 2050 at age 65 and earns a career-average wage of $43,084 would see her benefits cut by $1,993 a year ($14,988 - $12,995). A medium earner’s benefits at age 65 in 2080 would be cut by $2,878 ($14,988 - $12,110) – a 19.2 percent cut.
- A 25 year-old high-income worker who retires in 2050 at age 65 and earns a career-average wage of $68,934 would see her benefits cut by $5,445 a year ($19,872 - $14,427). A high-income earner’s benefits at age 65 in 2080 would be cut by $6,915, ($19,872 - $12,957) – a 34.8 percent cut.
- A 25 year-old, maximum-income worker who retires in 2050 at age 65 and earns a career-average wage of $106,800 would see her benefits cut by $8,242 a year ($24,240 - $15,598). A maximum-earner’s benefits at age 65 in 2080 would be cut by $10,055 ($24,228 - $14,173) – a 41.5 percent cut.
The December 3, 2010 Bowles-Simpson proposal would radically restructure the program:
- For the last 75 years, Social Security has always provided a fair return on the contributions made by workers and their families. Under the guise of deficit reduction, this package dramatically changes the structure of Social Security and weakens the economic security it provides.
- The plan uses a hard-to-understand change to Social Security’s benefit formula that eradicates fundamental features present since Social Security’s creation, including the following:
- The more workers contribute, the higher their benefits.
- All workers are guaranteed a fair return on their contributions.
- The two “Illustrative Earners” graphs demonstrate the extent to which benefits for earners at opposite ends of the spectrum converge and flatten under the Bowles-Simpson proposal. In so doing, the Bowles-Simpson proposal would steadily erode the link between a worker’s wages and benefits, transforming Social Security from a wage insurance program to one that resembles a welfare program.
- A low-income worker earning a career-average wage of $19,388 a year would receive about the same monthly benefit as a very low-income worker earning $10,771, despite having paid higher payroll taxes over his career.
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Views expressed on this page are those of the authors and not necessarily those of Campaign for America's Future or Institute for America's Future