It looks like my haircut will be about 10% under the President's Social Security plan.
http://www.washingtonpost.com/wp-dyn/articles/A45726-2005Jan3.html
http://www.washingtonpost.com/wp-dyn/articles/A45726-2005Jan3.html
According to the Social Security Administration's chief actuary, a middle-class worker retiring in 2022 would see guaranteed benefits cut by 9.9 percent. By 2042, average monthly benefits for middle- and high-income workers would fall by more than a quarter. A retiree in 2075 would receive 54 percent of the benefit now promised.
Presumably, the only benefit cuts are resulting from changing the formula used to normalize your highest 35 years of income...
And since SS is only about 1/6th of my projected income stream in my 70's, that is not world stopping. I still don't like it however.
I can take a guess but no hard facts. I think it was reported that the government doesn't want the cuts to affect those who are older than 50 or 55 (to avoid massive voter backlash). That may mean that the change from wage indexing to price indexing won't occur for 10 to 15 years. That might be enough to account for the difference.The 2075 retiree who retires at age 67 does not begin his/her last 35 years of work till 2040 (ie. in the future). Similarly, the 2042 retiree does not begin his/her last 35 years of work till 2008 (also in the future). So why does one see benefits cut by 25% and the other see benefits cut by 54%?
Michael,There is another part to the new plan. The maximum Social Security amount will be forever frozen at 2005 levels, in inflation adjsuted terms. It does not matter how much wages increase in the future. Your personal 35 years will only determine what percentage of the maximum you get, not how high the maximum possible benefit is set. The maximum will no longer rise over time in real terms like it does now.
The Bush administration has signaled that it will propose changing the formula that sets initial Social Security benefit levels, cutting promised benefits by nearly a third in the coming decades, according to several Republicans close to the White House.
Currently, initial benefits are set by a complex formula that calculates workers' average annual earnings in their 35 highest-paid years and adjusts those earnings up from those years to reflect standards of living near that worker's retirement age. That adjustment is based on wage growth over that time span. Under the commission plan, the adjustment would be based instead on the rise of consumer prices.
Where does this information come from?
Thanks, Michael.
phase out benefits . . . possibly entirely eventually.