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Romney would index SS benefit to prices rather than

Posted: Sep 22, 2012

Here's short explanation (if you stick to the summary at the top) of the effects of the various ways we can handle SS benefit increases. It really seems like our choice is to either

1. Accept lower and lower payments over the years, indexed to prices (Republican plan), or

2. Increase our SS tax paid with each paycheck now (7.5%+ us and 7.5%+ employer) and get benefits that keep pace with general income levels over the years, indexed to wages (the way we've been doing it).

http://www.ssa.gov/policy/docs/policybriefs/pb2010-03.html

;

Before I look at the link, my first thought would be - backwards typist

[ In Reply To ..]
Indexing to prices? Why would the payments be lower? Prices rarely go down but always go up.

I thought so too, but no. This might help "wean" us - from too much dependence on our

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government-administered programs. We know for sure now, from that secret tape and from his choice of a Libertarian-leaning VP, that he disapproves of them.

I see what you mean now LOL - backwards typist

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Still reading.

I found a simple definition of price indexing - backwards typist

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instead of the long, drawn out, speakalese on the SS site (which was done up in 2010-not too recent).

Anyway, the simple explanation is (and this article is from 2004 when Bush was looking into reforming Social Security:
The progressive indexing proposal would lower future benefits for middle- and high-income workers relative to what is currently promised. Low-income workers, meanwhile, would see no change in their promised benefits.

Below are estimates of how progressive indexing could affect future retirees. Keep in mind when evaluating reform proposals that if nothing is done to change the benefit structure, the Social Security Trustees project the system will be insolvent by 2041, at which point it will only be able to pay out 74 percent of promised benefits.

How progressive indexing works:
With progressive indexing, low-income workers would continue to see their starting benefits linked to the growth in wages over their careers. That's the formula currently used for all new retirees.

But high- and middle-income workers' benefits would be subject to different formulas.

High-income workers' starting benefits would be linked to price growth – which is a lesser measure since prices tend to grow more slowly than wages.

For example, under progressive indexing, a maximum-income worker retiring at age 65 in 2045 would get an annual starting benefit of $22,829 (in 2005 dollars), which is 29 percent – or about $9,000 -- less than what he is currently promised, according to an analysis by Jason Furman, a senior fellow at the Center on Budget and Policy Priorities.

It should be noted, Furman has been a critic of the president's proposals for Social Security reform. But his calculations are based on -- and in many cases drawn directly from -- reports of the Social Security Chief Actuary and from the 2004 Social Security Trustees report.

In addition to a decline in promised dollars, under progressive indexing the benefits of higher and medium earners will replace less and less of their pre-retirement income for each successive group of retirees.

For example, under a progressive price indexing model, a maximum earner who is 25 today and will retire in 2045 would receive benefits that replace 17 percent of his pre-retirement income.

A maximum earner who will be born in 2010 and retire in 2075 would receive benefits that replace only 12 percent.
Middle-income workers' starting benefits, meanwhile, would be calculated using a combination of both the wage and price indexes.

For example, a worker retiring in 2045 (whose average earnings are equivalent to about $58,000 today) would get a starting benefit of $19,858, or about 25 percent less than what the current system promises him.

It didn't fly back then and probably won't fly today. I still think the way is what I stated in another post.

Thanks. Encouraging that there are so many - options and tradeoffs, at least. NM

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