A new proposal would cap Social Security benefits for wealthy couples to reduce costs and prevent insolvency.
The Social Security trust fund is projected to run short of funds in 2032. If that happens, recipients could see a 24-28% cut in benefits across the board, Fox Business and USA Today reported.
With that in mind, the nonpartisan Committee for a Responsible Federal Budget, a Washington-based think tank, launched the Trust Fund Solutions Initiative on Tuesday to improve Social Security solvency by establishing a maximum benefit level, according to the report.
The Six-Figure Limit proposal would cap Social Security benefits at $100,000 for a couple retiring at full retirement age. The limit would be adjusted based on marital status and claiming age. Single retirees would have a benefit limit of $50,000, according to the organization.
“This is for people who already have millions and tens of millions in assets,” Marc Goldwein, senior policy director at CRFB, said in a statement obtained by USA Today.
How will the Six-Figure Limit cap Social Security benefit levels?
The CRFB noted that the cap would only affect 0.05% of wealthy couples. However, single retirees collecting $50,000 and couples collecting $100,000 in benefits will become more common as the Social Security formula changes, per Fox News and the organization.
According to the Washington think tank, the Six-Figure Limit would target only the wealthiest couples who earn those amounts. The reduction would amount to less than 1% of total income for these couples, even by 2040. The report also detailed the impact on top earners under an inflation-indexed Six-Figure Limit.
Jason DeBacker of the Open Research Group created three model options for the inflation-indexed Six-Figure Limit, which would primarily affect top earners over time. This reduces the average scheduled benefits for the top 1% by 5% in 2030, 7% in 2040 and 24% by 2060, while the majority of lower-income groups remain unaffected. By that time, most of the SFL savings would come from higher-income households, particularly the top 10% and a portion from the 1%, per the report.
Under these options, the CRFB projected that Social Security could save around $100 billion to $190 billion over a decade, and boost economic growth.
What are experts saying about capping Social Security benefits?
The CRFB’s Six-Figure Limit identified several measures that could save the federal program billions, but some experts believe capping or cutting Social Security benefits could be a dangerous course of action.
“Proposals that focus on capping Social Security don’t address the problem in front of Congress: ensuring every American gets every dollar they have earned,” Jenn Jones, vice president of financial security and livable communities at AARP, said in a statement to USA Today.
While some experts believe Social Security recipients deserve every penny they earned, others, like The Washington Post’s editorial board, sided with the CRFB’s effort to cap income on wealthy individuals.
“The Six Figure Limit is the right idea for a program that currently pays about one-third of benefits to retirees with incomes over $100,000,” the board at the newspaper wrote in an opinion piece. “The wealthiest members of the wealthiest generation in human history do not need more government largesse. . .”
While the Six-Figure Limit received pushback from some experts, they do believe that Congress should find ways to close the Social Security deficit.
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