By Danial Amjad, Policy Analyst
With automatic Social Security benefit cuts of up to 28 percent looming as soon as 2032, with the program paying out more in benefits than it takes in via taxes, a new proposal from the Committee for a Responsible Federal Budget (CRFB) would cap the program’s benefits to cut its expenses. Called the “Six Figure Limit,” the proposal would limit Social Security benefits at $100,000 per year for couples (or $50,000 for individuals) as part of a broader effort to strengthen the program’s finances.
This proposal would not change how benefits are calculated for most people. Instead, it would place a limit on the highest possible benefit amounts. Once a person’s benefit formula reaches the cap, they would only be able to increase their benefits by waiting until after full retirement age to retire (your benefits can increase by up to 24 percent if you delay retirement until the age 70).
For most retirees, this change would have no impact. CRFB estimates show that only about 1 in 2,000 beneficiaries currently receive benefits above $100,000 annually. These retirees all had high earnings during their careers to qualify for these benefits. One version of the proposal would immediately index the cap to average wages, leaving this proportion relatively stable over time. However, two other versions would grow the proportion of people subject to the rule by waiting 20 or 30 years before indexing the cap to wages.
However, TSCL cannot support this policy. All three versions of the policy amount to a benefits cut, which our supporters overwhelmingly oppose, and the versions that would keep the benefits cap for 20-30 years are sneakily a huge benefits cut.
Think about it this way: The value of the dollar has fallen by approximately half since the turn of the century. If current inflation patterns held as we implemented a $100,000 cap on benefits and held it steady for 20 or 30 years, that cap would end up feeling a lot more like $25,000 (or $50,000 for couples). While the policy might affect just 0.05 percent of beneficiaries today, this trick would make that figure go up quite a lot.
Instead, we support the policy that American seniors most favor. Right now, for people earning over $184,500, no income above that amount is taxed toward Social Security. Eliminating this limit would extend the program’s solvency by 90 years and allow us to pay more benefits, says Social Security’s Chief Actuary. Our research finds that about three in four seniors support this policy, regardless of party affiliation. In other words, while the Six Figure Limit would certainly help program finances, we prefer the solution that accomplishes this without cutting benefits.
