The House Republican Study Committee (RSC), made up of 176 House Republicans, has proposed several tough changes to Social Security in the fiscal year 2024 budget. Details of the budget are vague, but according to a press conference and report held by the RSC Expenditure and Budget Task Force: roll call The budget proposal suggests raising the retirement age at which Americans receive full Social Security benefits to 69. This would reduce benefits for future recipients by about 13 percent. The budget also recommends two benefit cuts that would be harmful to future beneficiaries of the Social Security Retirement Program and could make harsh changes to the Social Security Disability Insurance program. Together, these proposals would mean he would cut $718 billion over 10 years from the Social Security program and further spending cuts thereafter. Congress and the President should reject these proposed changes.
Raising the social security retirement age
Under current law, workers born after 1960 who paid Social Security payroll taxes must wait until age 67 to retire to receive their full benefits. (For workers born between 1943 and 1954, the full retirement age is 66 years. For workers born between 1955 and 1959, the full retirement age increases by two months each year.) You can retire and begin collecting benefits at age 62. However, penalties will be imposed in the form of reduced benefits. For example, a worker retiring at age 62 will receive only 70% of her full benefit. Workers who delay retirement past age 67 may receive increased benefits. A worker’s monthly benefit is 24 percent higher if she retires at age 70 than if he retires at age 67. However, the worker will not receive an increase if she retires after the age of 70.
according to roll callThe RSC’s Budget proposes to increase the age for full retirement benefits from 67 to 69 over eight years from 2026. More specifically, the age at which retired workers can receive their full retirement benefits will be increased by three months per year. From 2026 he will be a worker by 2033 when he will reach the age of 62. If a worker reaches the age of 62 after 2033, the age at which he receives full benefits will remain at the age of 69. Therefore, the age at which benefits begin for all workers currently under the age of 59 will be raised. They were able to withdraw their entire retirement savings. Current retirees or those who reach age 62 by 2025, the earliest age eligible for retirement benefits, will be exempt from the increase.
13%
The amount by which all subsequent retirees will have their benefits reduced when they reach the retirement age of 69 in 2033 under the proposed RSC.
Under the RSC’s proposals, once the retirement age reaches 69 in 2033, all subsequent retirees’ benefits would be reduced by around 13 per cent. This depends on how benefits are calculated in the Social Security program. This cut will be especially damaging for those retiring at age 62. Under current law, these early retirees already receive only 70% of their full benefits, but under the RSC proposal, they would only receive 61% of their full benefits*. This is a reduction of approximately 13%. Similarly, someone who retires at age 65 would receive 86.7% of their full benefit under current law, but would only receive 75% of their full benefit under the RSC proposal. ** Using the same logic again, about 13 percent. The full retirement age for workers who will reach age 62 between 2026 and 2033 will be 67 to 69. These workers would also see a reduction in their retirement benefits, albeit by a smaller amount than the reduction for younger workers.
Raising the retirement age would disproportionately harm low- and moderate-income seniors
Raising the retirement age would disproportionately harm low- and moderate-income seniors, who are most dependent on Social Security for all or part of their income. The resulting benefit cuts will hit Black and Latino retirees particularly hard. This is because they have less access to private retirement accounts and smaller balances in those accounts.
Workers who are now 59 years old have only three years to adjust their retirement plans
according to roll call, The RSC’s proposals would give workers who are currently 59 years old a chance to improve their planned retirement age, savings and other financial options, as the retirement age increase and reductions in social security benefits are phased in. The plan provides a grace period of only three years for adjustments to be made. This may not be enough time and may cause unnecessary hardship.
Response to the theory of raising the retirement age
Proponents of raising the full retirement age often argue that raising the retirement age will help solve labor shortages because people will live longer and be able to work longer. He has two problems with this argument.
First, many people suffer from poor health, are unemployed, have caregiving responsibilities, or have physically demanding jobs, so as they get older You won’t be able to work for long. According to a study by the National Academy of Social Insurance, in 2012, more than 8 million older workers [ages 55 and above] Health issues forced me to retire earlier than expected. ” Second, low- and middle-income seniors, who would be hardest hit by raising the retirement age, have not experienced the same increases in life expectancy that higher-income people have. This is especially true for black retirees. Black retirees, on average, have lower lifetime earnings than white retirees. These retirees have a shorter life expectancy than white retirees. For many of these people, raising the retirement age will only make financial security even more out of reach.
Some analyzes suggest that people who become ill or injured may try to qualify for Social Security Disability Insurance (SSDI) benefits until they reach full retirement age. Masu. Unfortunately, however, the RSC budget proposes that anyone over the age of 62 will not be able to apply for her SSDI.
Two other RSC proposals for the Social Security Retirement Program
The RSC budget makes two additional detrimental changes to the Social Security retirement program. The first would reduce benefits for future beneficiaries who earn more than $80,652 (in today’s dollars) annually as workers and are currently under age 59. *** The budget suggests that workers with these incomes are “wealthy” and can afford this change. , But many people still struggle to make ends meet. Additionally, under current law, these beneficiaries have low replacement rates, making it difficult for them to maintain their pre-retirement standard of living. For example, a worker who retires at full retirement age in 2022 and has an annual income of $96,039 (in current dollars) would have a replacement rate (Social Security benefits as a percentage of pre-retirement income) of only 33.6%. **** The effect of the RSC proposal is to further reduce these already low replacement rates.
The second change would limit and phase out so-called supplemental benefits for future beneficiaries who earn more than $80,652 a year (in today’s dollars) as workers and are currently under age 59 . *** Under current law, the important supplementary benefits are: Spouse’s insurance benefits. The spouse of a retired worker who has no income of her own and therefore no retirement benefits of her own may receive a spousal benefit equal to her one-half of the worker’s retirement benefits. Spouses may have had no or limited income because they spent time away from the labor force due to childcare, caring for other family members, declining health, or limited employment opportunities. As mentioned in the previous section, the retirement benefits of workers whose spouses are subject to this proposal are not inherently expensive, and the cost of living is higher for two-person households than for one-person households. This makes it difficult for retired couples to maintain an adequate standard of living even with their spouse’s insurance benefits. If this benefit were phased out, the ability of couples to maintain a decent standard of living after the worker retires would be further diminished.
These two proposals, combined with the RSC proposal to raise the retirement age to 69, would reduce Social Security Retirement Program spending by $224 billion over the decade from 2024 to 2033. The program would then result in further spending reductions. Year.
RSC claims about President Biden and Social Security are false
The RSC budget claims President Joe Biden proposes to cut Social Security retirement benefits by 23 percent in 2033. In fact, the Biden administration has made no such proposal. If legislation to strengthen social security finance is not enacted by then, benefits will be cut by 23% in 2033. Additionally, the president’s fiscal year 2024 budget makes clear that the administration “opposes any attempt to reduce Social Security benefits.” Additionally, President Biden has previously proposed improving Social Security’s financial health by imposing a Social Security payroll tax on incomes over $400,000, and the fiscal year 2024 budget states: There is. High-income earners are paying their fair share. ”
conclusion
If passed, the RSC budget would change the Social Security program by significantly reducing benefits for future retirees who rely on it to make a living. One of the changes, raising the retirement age, will especially hit low- and middle-income retirees. The budget also would make a myriad of changes to SSDI, including reduced benefits, reduced eligibility, and less access to representation in the appeals process. Overall, the RSC budget proposes $718 billion in cuts to the Social Security program over 10 years, followed by further spending cuts. Congress and the president should reject these changes.
The author would like to express many thanks to Jean Ross, Jessica Vela, and Mia Ives-Rublee for their very helpful reviews, comments, and suggestions for this column.
* Early retirees will receive 61% of their full benefits, which is approximately 87% of the 70% of their full benefits they would receive under current law.Article 202 social security law It specifies that the actuarial reduction in benefits for workers who retire five years before full retirement age is 30%. Therefore, if the full retirement age is her 67 years, a worker who retires at age 62 will receive a 30 percent benefit reduction. If the full retirement age were raised to 69 under the RSC’s proposal, Social Security actuaries would have their retirement age further reduced for each additional two years from age 67 to the normal retirement age of 69. I recommend it when it comes to this. 4.5% per year. Therefore, since the reductions do not overlap, the total reduction is 39 percent and the benefit is 61 percent of the benefit at full retirement age.
**Article 202 of social security law Provides that the actuarial reduction in benefits for workers who retire four years before full retirement is 25 percent. If the full retirement age as proposed by the RSC is when he is 69 years old, a worker who retires at age 65 will retire four years before her full retirement age.
*** The RSC budget says the proposal would apply to people “above the wealthiest PIA benefit factor”. The Wealthiest Principal Amount (PIA) element refers to the “bend point” of the Wealthiest PIA, expressed in dollars per month. This bending point is $6,721 In 2023, it will be $80,652 per month, per year. Therefore, this proposal would apply to anyone who earns at least $80,652 per year in today’s dollars. The RSC budget also shows that his two other severance proposals apply to the following workers: same age As a worker affected by the proposed retirement age increase.
**** This replacement rate applies to workers applying for benefits. 2022 Full retirement age is 66 years and 6 months.