Social Security.gov is reporting that there are, currently, 9 different proposals to cut Social Security benefits in order to ensure the future solvency of the program.
The 9 proposals, which you can find here, are:
Proposal #1: “Reduce the annual COLA by 1 percentage point” starting December 2024.
- This option will decrease Social Security benefits for retirees.
Proposal #2: “Reduce the annual COLA by 0.5 percentage point” starting December 2024.
- Similar to Proposal #1 Security benefits will decrease but by only 0.5%
Proposal #3: “Compute the COLA using a chained version of the consumer price index for wage and salary workers (CPI-W)” starting December 2024.
- Social Security is estimating that this proposal “will reduce the annual COLA by about 0.3 percentage point, on average”.
Proposal #4: “Compute the COLA using a chained version of the consumer price index for wage and salary workers (CPI-W)” but start it in 2026 instead of 2024.
- Social Security is estimating that this proposal “will reduce the annual COLA by about 0.3 percentage point, on average”.
Proposal #5: “Starting December 2024, add 1 percentage point to the annual COLA for beneficiaries who have lived past a “specified age”.
- It appears that only certain retirees who are a certain age and older will receive a COLA going forward.
- This proposal may lower benefits across the board for retirees, but the good news, those retirees who reach the specific age may receive a COLA that would be higher than before.
Proposal #6: “Starting December 2025, compute the COLA using the Consumer Price Index for the Elderly (CPI-E).
- The CPI-E tracks the expenses specifically for Americans who are 62 years of age or older.
- Historically this Index is much lower than what the Social Security Administration uses and may lead to lower Social Security benefits for retirees.
- Social Security is estimating that this proposal “will reduce the annual COLA by about 0.2 percentage point, on average”.
Proposal #7: “Starting December 2024, reduce the annual COLA by 1 percentage point, but not to less than zero. In cases where the unreduced COLA is less than 1 percentage point, do not carry over the unused reduction into future years”.
- With any reduction in COLA benefits retirees will receive will be lower.
Proposal #8: “Starting December 2024, for OASI beneficiaries only (DI beneficiaries would only be affected when their benefit converts to OASI at NRA), the annual COLA would be based on the chain-weighted version of the CPI-U”.
- The CPI-U tracks the averages of consumer goods for urban consumers.
- According to the Bureau of Labor the Chained Weighted CPI-U (C-CPI-U) “employs a formula that reflects the effect of substitution that consumers make across item categories in response to changes in relative prices”.
- Meaning that items that are no longer being bought will no longer be included into the calculation.
Proposal #9: “For single/head-of-household/married-filing-separate taxpayers with modified adjusted gross income (MAGI) below$108,700 and for joint filers with MAGI below $217,400 for December 2025 ($85,000 and $170,000 multiplied by estimated CPI-U for 2018-2025), use the chain-weighted version of the Consumer Price Index for All Urban Consumers (C-CPI-U) to calculate the cost-of-living adjustment (COLA), beginning with the December 2025 COLA. For those beneficiaries whose MAGI is above these thresholds, provide no COLA”.
- Retirees who do NOT reach Medicare’s Income Related Monthly Adjustment Amount (IRMAA) will receive a COLA based on Chained Weighted CPI-U.
- Retirees who DO reach IRMAA they will receive no COLA.
Conclusion of Proposals to cut Social Security benefits:
With the future of the Social Security benefit being in jeopardy it may be only a matter of time before there are cuts to Social Security benefits.
The above proposals are just that, proposals. Until there is an act from Congress passing legislation these proposals will not move forward.
