Social Security Benefits Are Modest: Benefit Cuts Would Cause Hardship for Many

Image: Penn State via Flickr Creative Commons (https://flic.kr/p/MzurY5)

[Center on Budget and Policy Priorities] Social Security benefits are a perennial target for cuts because the program faces a long-run shortfall. Some lawmakers and opinion leaders mistakenly portray the program’s benefits as lavish. The fact is, benefits are modest and workers have earned them by paying into Social Security — protecting themselves and their families if they retire, become disabled, or die leaving family members to support.

Here are five key facts that policymakers need to keep in mind:

  1. Social Security benefits are modest.
  2. Most beneficiaries rely on Social Security for most of their income.
  3. For most seniors, Social Security is the only income they receive that’s guaranteed to last as long as they live and to provide full inflation protection.
  4. Social Security benefits in the United States are lower than many other developed countries.
  5. Future retirees already face lower benefits (relative to their past earnings) than current retirees because of a rising Social Security retirement age and escalating Medicare premiums.

These facts argue for avoiding cuts in future benefits — a position that the majority of Americans support strongly.[1]

Social Security faces a real but manageable long-term shortfall. The program’s trustees project that its trust fund reserves will last until 2035, and that even after that, tax revenue anticipated under current law would support three-fourths of scheduled benefits. Social Security’s fundamental challenge is demographic, traceable to a rising number of beneficiaries rather than to escalating costs per beneficiary. In the mid-2030s, when the large baby boom generation exerts its greatest demographic pressure, benefits will cost just under 6 percent of Gross Domestic Product (GDP), up from 5 percent today.[2]

There is no imminent crisis, and policymakers have time to put Social Security on sound financial footing. However, they shouldn’t wait until the last minute because a carefully crafted solvency package could strengthen public confidence in the program, share sacrifices fairly across generations, and give workers plenty of notice so that they can plan their work, saving, and retirement.

Read the rest: Center on Budget and Policy Priorities »

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