Social Security reform: If you’re under 50, watch out
You’re eager to buy your favorite candy bar. You go into the store. You pay the usual amount. But when you open the familiar wrapping, you get a terrible surprise. It’s smaller — way smaller — than you expected.
Millions of Americans may have an experience like this in the future, only with something far more important. The shrunken candy bar will be their Social Security checks. Benefits will be far smaller than expected if Social Security is “reformed.” The change would come through a bill submitted by Rep. Sam Johnson, R-Plano.
The Social Security Reform Act of 2016 proposes 15 changes in Social Security. Of those, 10 have impacts under 0.10 percent of funding. Many are considered “negligible.” The big bucks are in three proposals. One works to change the benefit formula. Another advances the full retirement age. The third changes the method for calculating inflation. Those changes would cut benefits by 2.94 percent of payroll over the next 75 years.
The changes would have no immediate effect. But they would start to bite for workers retiring in 2030 or later. That means workers who are 50 or younger. So if you’re already retired, you’re safe. But your adult children and grandchildren will see their benefits reduced. Meanwhile, they will continue to pay employment taxes that support current retirees.
Benefit cuts increase each year after 2030. A 33-year-old medium-wage worker today would experience a benefit cut of 33.2 percent when retiring in 2050. That cut would increase to 34.1 percent by the time he or she reached age 95.
Bottom line: This would be a good time to make certain that your members of Congress read more than press releases. The chief actuaries’ letter is a good start.