Tuesday, May 19, 2015

Social Security Benefits Will Be Cut In 2017

No matter who wins the White House in 2016, there's no getting around it: Social Security benefits will be cut starting in 2017. A 1983 pact between President Reagan and the Democrat-led Congress to stave off an imminent Social Security financing crisis included a hike in the official retirement age from 65 to 67 somewhere in the far-off future.
But that pact is pushing the limits of age-related reforms , even as a new funding crisis builds for the retirement program.
The retirement age rose to 66 in two-month increments between 2000 and 2005. Between 2017 and 2022, the retirement age will rise to 67.
In practical terms, workers claiming benefits at age 62 in 2022 and beyond will face a 30% reduction in the annual benefit that they receive throughout their lives. When the retirement age was 65, those claiming benefits at 62 suffered a 20% cut.
The cuts are intended to be an actuarially fair trade-off allowing people to get a benefit that's smaller but runs for more years.
While it may be fair, that doesn't mean it won't hurt. If that 30% cut were in place today, it would shrink the available benefit for a $30,000-earner turning 62 down to the poverty level, a bit less than $12,000 a year. That's hardly enough to ensure income security for members of the working class who live long enough to deplete their savings.
In Trust Fund We Bust
Yet despite the coming rise in the retirement age, Social Security's cash deficit is set to explode to $361 billion in 2025 from $74 billion in 2014, the Congressional Budget Office estimates. The CBO's estimates point to the $2.8 trillion trust fund being depleted late in 2029, after which program revenues will cover only about 75% of scheduled benefits.
Something has to be done to put the program on a firmer footing, and potential Republican candidates have begun stepping forward with their ideas. Chris Christie and Jeb Bush have both put themselves squarely behind a further increase in the retirement age. Christie specifically advocated a hike to age 69, closing a bit more than one-third of the financing shortfall.
But a hike to age 69 would mean that early retirees would have a whopping 39% benefit cut for life. To avoid that scenario, Christie proposed raising the earliest eligibility age for claiming benefits to 64, in tandem with the retirement-age increase.
Read the rest of the story HERE.

If you like what you see, please "Like" us on Facebook either here or here. Please follow us on Twitter here.


No comments: