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June 14, 2013

Senior Lookout: Social Security cuts will affect us all

Much has been made of the desire to keep Social Security benefits intact for current and soon-to-be retirees, but a new proposal involving changes to the way Social Security cost-of-living increases are calculated, would actually mean a loss to those who are most dependent upon those benefits.

That not only affects seniors, it affects widowed spouses, disabled children, and adults.

The increase would be figured, not on the current system, but on something called the “chained CPI” or chained consumer price index. The important difference is that those benefits would grow more slowly.

Small reductions to the cost-of-living raises might seem insignificant at first, but over the long term, could result in the largest reductions affecting the oldest and longest term disabled individuals.

AARP provides the following example: 92-year-old beneficiaries who were on the program for 30 years, would see their benefits cut by 8.4 percent. Disabled children could see the largest cuts over their lifetimes.

Older Americans are least able to absorb cuts, as they are more reliant on Social Security for their income at that stage of life. There is currently a cap on the wages upon which Americans pay Social Security taxes. That cap is now $106,800 of income.

That means that, if your income is more than that, you don’t continue to pay the 6.2 percent tax on the remainder. As a society, are we really talking about cutting benefits on the most frail, and most disabled, without considering eliminating that cap?

A response to this question has now hit social media in the form of a Facebook page called “Fix Social Security — remove the $106,800 annual cap.” And the National Journal recently published an article stating, “It’s easy to fix Social Security. Unlike Medicare and Medicaid, it’s simple arithmetic. If only the politics added up.”

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