Social Security benefits could get limits thanks to new proposal

A new proposal might cap Social Security benefits for certain recipients.

According to the Washington, D.C., think tank Committee for a Responsible Federal Budget (CRFB), Social Security is less than a decade away from insolvency, triggering a law that would call for a 24 percent cut to benefits across the board.

“Yet, despite facing large deficits, Social Security now pays the wealthiest couples roughly $100,000 in annual benefits,” the CRFB states.

The CRFB has therefore released the “Trust Fund Solutions Initiative,” a proposal that seeks to place a maximum benefit level on specific beneficiaries. This limit would be adjusted to reflect retirement age and marital status.

“The ‘Six Figure Limit (SFL)’ would set a $100,000 cap on the total benefit a couple retiring at the Normal Retirement Age (NRA) can receive starting this year,” the committee continues. “The SFL would be adjusted based on marital status and claiming age, with a $50,000 limit for a single retiree collecting at the NRA.”

The CRFB adds: “The SFL could be indexed over time in a variety of ways. For this analysis, Jason DeBacker of the Open Research Group modeled three options: A $100,000 limit indexed to inflation; a limit frozen in nominal terms at $100,000 for 20 years and then indexed to average wage growth; and a limit frozen at $100,000 for 30 years before being indexed to wage group.”

U.S. News & World Report reports that, despite the CRFB’s claims this would aid Social Security’s solvency, reactions to the proposal are mixed.

“Practically speaking, very few retirees could be affected,” certified financial planner for VIP Wealth Advisers Mark Stancato told the publication via email. “You have to be a top-earning household to even approach six-figure Social Security income, so for a majority of people, this isn’t something that materially changes their plan.”

Stancato added: “What I tell clients is simple: Don’t build your retirement around perfect assumptions about Social Security.”

Critics of the proposal, on the other hand, express concerns about how benefit caps could weaken the contribution-based model, according to Capitol Skyline. Plus, public trust in Social Security could decline.

Further information regarding this proposal remains pending.

Economy

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