Social Security Reform: Assessing Changes To Future Retirement Benefits

Publication Date: December 1999

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Banking and finance

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Abstract:

For the past 15 years, the trustees of the Social Security trust funds have repeatedly projected long-range financing problems for the system. They have projected that its income will not keep up with its outgo and eventually it will be unable to pay its promised benefits in full. Policymakers have reacted with a wide range of ideas. Most attempt to show how they would restore the system to good health or how they would phase in what they believe is a better system — the goal being to show the public that a more secure national retirement system is attainable. The Social Security debate, however, is as much about the insecurity people feel about their retirement in general as it is about Social Security’s long-range finances. People need to have some understanding of what their own benefits will be; how much of their earnings they will replace, or how much purchasing power they will have. Only then can they assess how much other income and savings they will need. The prospect that Social Security will be changed can only heighten that uncertainty. Those who attempt to illustrate the effects of their proposals on “individuals” do so by showing how much their benefits would differ from those promised by current law. However, many people mistakenly perceive current law to mean what retirees receive today. Legislation enacted in 1983, mandating a gradual increase in the age for receipt of full benefits from 65 to 67, will cause future retirement benefits to be lower on a relative basis.