New proposal would limit some Social Security yearly benefits

A new proposal would cap Social Security benefits for some recipients, a move designed to address the program’s looming financial shortfalls.

The Committee for a Responsible Federal Budget, a Washington, D.C. think tank, has proposed a plan aimed at high-earning individuals and married couples. The plan would cap benefits at $100,000 for married couples or $50,000 for individuals for people retiring at the Normal Retirement Age, or NRA, or age 67.

“Social Security faces a projected 4% of taxable payroll solvency gap over the next 75 years, necessitating increased revenue, slower benefit growth, or both,” a white paper on the proposal said. “In combination with other reforms, the Six Figure Limit could help restore Social Security solvency in a targeted, timely, progressive, and pro-growth way.”

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Less than 2% of the roughly 56 million Social Security beneficiaries age 65 and older receive more than $50,000 a year. Currently, the highest monthly benefit someone can receive is $5,181, which requires 35 years of earnings at the maximum taxable income of $184,500 and retirement at age 70.

The plan is the latest to address Social Security’s projected shortfall. The trust fund devoted to retirement benefits is set to run out in 2032, and just 24% of benefits would be payable.

Implementing the Six Figure Limit would generate savings immediately and improve over time, the study showed. If indexed to inflation, it could initially save $100 billion over 10 years, closing one-fifth of the 75-year solvency gap and over half of the program’s shortfall in that period.

The change would “progressively target benefit changes at the wealthiest retirees,” the analysis noted, reducing average benefits by 5% among the top 1% of recipients without any impact on the bottom 90%.

“The Six Figure Limit would allow Social Security to continue paying benefits sufficient to ensure adequate retirement security for virtually all Americans covered by the program while capping those benefits at $100,000 per couple – a cap more than five times the senior poverty threshold,” it noted.

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