Agency Puts Lump of Coal in Seniors’ Stockings

A letter sent out by the Social Security Administration during the holidays had one reader concerned. fizkes/Shutterstock

Just last week, I wrote a column in which I passed along my ideas for a holiday gift for senior citizens. One is a booklet published by the Social Security Administration called “Fast Facts and Figures.” It’s a short booklet (about 40 pages) crammed with fun and interesting tidbits about the Social Security program. Just Google “Social Security fast facts and figures 2022” and it will lead you to a link where you can read the booklet online or order a printed version. The other idea is to get one or both of my Social Security guidebooks highlighted at the end of this column.

The day after I submitted that column to my syndicators, I got an interesting email from a lady. Based on what she wrote, it seems like the Social Security Administration has decided to add a lump of coal to the Christmas stockings of senior citizens approaching Social Security age. Here’s the email I got.

Q: I recently turned 60 and I got a statement from the Social Security people that told me what my benefits will be at age 62, at 67 (my full retirement age), and at 70. That was all well and good. But then they added a statement that said these payments will go down in 2034. It said for every $1,000 I get in Social Security my benefit rate will be reduced by $220.

How can this be? This is going to be a huge problem for me, and lots of other seniors, I’m sure. I’m so confused. Can you help me understand?

A: Well, isn’t that a nice holiday gift from the Social Security Administration? However, I’m sure if you go back and look at the statement you got from the SSA, you'll see some fine print that says something like this: “If no changes are made to Social Security before 2034,” then those reductions in benefits will happen.

As I’ve explained a thousand times in this column, because of the crush of retiring baby boomers (10,000 of us are retiring every single day), the Social Security program needs to be reformed to keep it solvent for future generations. And as I’ve also explained a thousand times, relatively modest reforms will accomplish that goal.

So on the one hand, I applaud the SSA planners for doing what they can to make people aware of the issue. I’m sure part of their plan was to get the public to alert their members of Congress to work on reforming Social Security.

But on the other hand, I wish they would have made the “your benefits will be cut in 2034” message a little less threatening or made the caveat about “if no changes are made to the program” a little more obvious so that people like the person who sent me the email aren’t frightened and misled.

And speaking of changes to the program, in past columns I included a short list of possible reform proposals for Social Security. I'll include some of them in today’s column. To fix Social Security for the long term, you either need to raise revenues or cut benefits. These proposals include some of each.

Proposals That Would Reduce Benefits

No. 1: Raise the retirement age to 70 by 2060

Why this is a good idea: People are living longer, healthier lives and with enough lead time, they'd be able to plan for the delay in receipt of their benefits.

Why this is a bad idea: Would you really want to work until you are 70 years old? Employers will be faced with higher health care costs for older workers.

No. 2: Reduce cost of living adjustments (COLAs) paid to Social Security beneficiaries by 1/2 of 1 percent

Why this is a good idea: Economists believe the current formula overstates inflation for seniors.

Why this is a bad idea: I’ve never met one senior citizen who believes the economists. Also, COLA reductions are cumulative. The longer you live, the more you will suffer financially.

No. 3: Reduce benefits by 5 percent for all future retirees

Why this is a good idea: All retirees should share responsibility for shoring up Social Security.

Why this is a bad idea: Lower-income beneficiaries couldn’t afford the reduction.

No. 4: Means test: Reduce benefits to those making more than $100,000

Why this is a good idea: Ensures Social Security is paid only to people who need it the most.

Why this is a bad idea: Would turn Social Security into a welfare program.

Proposals That Would Raise Revenues

No. 1: Raise Social Security payroll tax by 1/2 of 1 percent

Why this is a good idea: The Social Security tax hasn’t been increased in more than 30 years. This would be a modest price to pay for long-range Social Security stability.

Why this is a bad idea: Extra tax burden would discourage savings and investment.

No. 2: Tax all earnings (the 2023 payroll tax base is $160,200)

Why this is a good idea: It impacts only higher-income people who can afford it.

Why this is a bad idea: Benefits are tied to taxes paid. To make this proposal work, you'd have to raise taxes on the wealthy but limit what they get back in return.

No. 3: Make folks pay income tax on all Social Security benefits (currently only a portion is taxed)

Why this is a good idea: All other pensions are fully taxed.

Why this is a bad idea: It would impact middle-income taxpayers the most.

No. 4: Require all state/local government workers to pay into Social Security

Why this is a good idea: All working Americans should pay for Social Security.

Why this is a bad idea: It would jeopardize many well-run government employee pension plans.