RETIREMENT – ANDY LANDIS – In late 2016, Representative Sam Johnson (R-TX) recently introduced the “Social Security Reform Act of 2016 (HR 6489). http://samjohnson.house.gov/news/documentsingle.aspx?DocumentID=398516.
Congress floats such proposals frequently, but Rep. Johnson’s bill is getting more attention—after all, he is the Chair of the House Ways and Means Committee’s Social Security Subcommittee, and therefore oversees GOP plans for your Social Security.
Rep. Johnson takes a chainsaw to Social Security, with means-testing, a higher retirement age, reduced cost-of-living protection, and other draconian benefit cuts. All have been on the Grinch’s holiday wish list for decades. Will the electorate really buy this stocking full of coal?
Take means-testing alone. That would instantly change Social Security from an earned benefit to a welfare program. Say goodbye to the dignity of earning your own retirement security through work.
No question, Social Security will have a financial shortfall https://www.ssa.gov/news/press/releases/#/post/6-2016-1 in the 2030s. Options to fix it https://www.ssa.gov/OACT/solvency/provisions/summary.html are legion. Some reduce benefits, others raise taxes. Most are a mix of the two. Rep. Johnson grabs every tool that cuts, and ignores any that build.
It’s not easy to fix Social Security using only benefit cuts. Average benefits https://www.ssa.gov/news/press/factsheets/colafacts2017.pdf are only $1360 per month (2017). How much blood can you squeeze from that turnip?
The incoming Congress and Administration could learn from the last overhaul of Social Security finances, in 1983. https://www.ssa.gov/history/1983amend.html With a bipartisan balance http://www.usnews.com/opinion/articles/2009/04/02/bipartisan-reagan-oneill-social-security-deal-in-1983-showed-it-can-be-done of targeted benefit cuts and workable tax increases, we scored a half-century of Social Security solvency.
My 7-point plan for Social Security solvency www.andylandis.biz/ssis_support/SolvencyPlan2017.pdf is a similar approach for today. It stands in stark contrast to Rep. Johnson’s bill. It preserves benefits through modest tax increases like raising the taxable earnings cap, formula tweaks, and investment returns.
The point is, it’s unrealistic to fix Social Security using only cuts or only tax increases. It will be a balance of both.
Where does all this leave your retirement? First, don’t panic. Lopsided plans like Johnson’s occasionally pop up, but rarely advance. The legislative process will run its course. http://www.thefiscaltimes.com/2016/12/11/Here-s-First-Draft-GOP-s-Plan-Overhaul-Social-Security The final product won’t be Johnson’s meat ax.
Still, the GOP has long favored Social Security reductions. With GOP control of Congress and the White House, it would be prudent to review your own retirement plan. Imagine a smaller Social Security component, and work with that assumption. So now, as always, keep on planning.