President Obama’s bipartisan Deficit Commission released a draft of its proposal to fix America’s budget issues and takes several steps to Strengthen Social Security.
One of the most challenging goals, the Commission aims to return Social Security to a state of “sustainable solvency” for the next 75 years, while also reducing the rate of poverty amongst seniors.
The report outlines objectives to reach this goal, including the prevention of the 22 percent across-the-board benefits cut projected to occur in 2037. Also, in order to reduce elderly poverty, a new special minimum benefit has been proposed to keep full-career minimum wage workers above the poverty threshold. The minimum benefit would follow wage-index to ensure effectiveness at present and into the future.
The proposal also suggests raising the retirement age to reflect the current, longer life expectancy — increasing the age by one month every two years after it reaches 67 under current law. Following this formula, the normal age of retirement would be 68-years old around the year 2050 and 69-years old in 2075. The report also suggests raising the age of early retirement 64, in the same manner.
The Commission also proposes raising the amount of income subject payroll taxes that fuel the Social Security program from this year’s $106, 800 to around $190,000 by 2020. The Commission would make adjustments to the current Social Security benefit formula as well. It would create a new bend point at the 50th percentile, meaning that benefits for the wealthiest 50 percent of retirees would decrease from currently projected levels.
Other reforms would be aimed at ensuring that the oldest, poorest retirees would receive the support they need. A Hardship Exemption would be introduced for those unable to work beyond the age of 62.
Additionally, the Commission would direct the Social Security Administration to design a plan in order provide for the early retirement needs of workers in physical labor jobs. A benefit boost would be provided to older retirees most at risk of outliving their other retirement resources.
The report highlights ways to promote smart retirement decisions by allowing greater flexibility in how benefits are claimed. Retirees would have the choice of collecting half of their benefits early and the other half at a later age in order to support phased retirement options and minimize the impact of actuarial reduction. The commission also suggests developing an education campaign to encourage greater personal savings, delayed retirement, and early collection of benefits.
Written by Kelly Mellott