I’ve believed all along that Social Security benefits as we know them aren’t going anywhere, but it turns out that there are some sneaky ways that the government can reduce the payouts it will have to make.
One step that would definitely save the government a good amount of money would be changed the way it measures inflation. Currently, Social Security calculates inflation based on theÂ Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
Both White House officials and Congressional leaders (Republican and Democrat) are proposing calculating inflation for social security benefits using the Chained Consumer Price Index. The result would likely be that social security inflation would be slower than under the current rules.
It would be pretty hard to get away with saying that people don’t deserve the benefits they were promised and to reduce someone’s paycheck by a hundred dollars a month. There would be an uproar because it would be seen as stealing from needy seniors.
But by changing the calculation that determines just how much of an increase people get each year, this change would be much less noticed and the impact would be felt by only a small very amount each year.
The proposed change would put the rate of inflation at an average annual rate of about 0.3% less than the current calulation. So after 10 years, people would receive a check that’s about 3% smaller than what they would if no change is made.
Still, the proposed change would cost the average retiree about $18,000 over 25 years. I’m sure the government would love to save that much per retiree. It comes out to an estimated $112 billion over 10 years, and since it compounds, the savings for the government would continue to grow.
About 60% of seniors rely on Social Security benefits for at least half their income. And by 2020, Social Security benefit payments are projected to total $1 trillion, so clearly we’re dealing with a large issue. Saving $100 million over 10 years is not going to fix the problem, but it would certainly be a start.
Readers, what do you think of this proposed fix? Would it be helpful or is it just a sneaky way of reducing the benefits of seniors?