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Government Could Lower Social Security Benefits Without Anyone Noticing

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 the 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?



  1. I think any practical solution to the money issues around Social Security are going to have their drawbacks. One thing to keep in mind with this one is that Social Security benefits never go down, regardless of what the CPI does. Don’t know if that makes up for adjusting less for rising prices.

    My guess is that this wouldn’t completely close the gap between funding and expenses and we’d still need to tweak the starting age or another factor to hit break even.

  2. If you don’t give it to people in the first place, it will be a lot easier to absorb than if you give it and then take it away. That’s why I think the little ‘break’ they’re giving in the form of the 2% less social security contribution for this year is stupid, because how many people have already absorbed that into their monthly income and are not going to look too kindly upon that deduction coming back out next year.

  3. I understand and accept the change however the original CPi was without food and gas. In the last year or so food and gas has been inflationary. The cost of oil and the value of our dollar contributes to the cost of oil. We need to address our policies that affect oil.

  4. I hate socical security and the horse it rode in on. Unless they make some major changes, like privatizing it, they are going to have to lower benefits… and not just .03% less of a raise. there are other things they can do to lower them, like raise the qualifying age.

  5. There may be no alternative to lowering benefits–by what ever means they do it. With the baby boomers retiring, the cost of the plan is rising rapidly, and it’s more important that it’s kept going, even if slightly reduced.

    The response from the citizens should be to take on more responsibility for our own retirement planning. That means funding 401k’s, IRA’s and Roth IRA’s to the greatest degree possible, in addition to paying off debts and lowering expenses. There’s not much we can do to change what’s happening with social security but there’s plenty we can to to react to the changes.

  6. I hate to tell all of you this, but it used to be that my mother in law got a SSI increase every year; even if it was only a few dollars. But this year is the first time in about three or four that they’ve gotten one? They have already done this, and it’s hurting many seniors. They cannot afford much of the medicines they need or the medical care that medicare doesn’t cover – yes, there are things that medicare doesn’t cover. She needs her last two teeth pulled, and to get dentures, but that’s not gonna happen. We can’t afford it either.

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