A social security benefit cap proposalis getting a lot of attention right now, and it is not hard to see why. Social Security’s trust fund runs dry as early as 2032, and without any action from Congress, retirees face a benefit cut of around 28%. The plan, known as the “Six Figure Limit,” came from the nonpartisan Committee for a Responsible Federal Budget (CRFB) in March and sets a $100,000 annual cap on benefits for couples retiring at full retirement age, also a $50,000 limit for single retirees. The social security cap proposal closes at least one-fifth of the program’s long-term solvency gap, saving between $100 billion and $190 billion over a decade.

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Right now, the social security benefit cap proposal draws heavy debate across Washington think tanks and retirement advocacy groups. CRFB argues the cap targets the wealthiest retirees, those who collect up to $100,000 a year after both spouses earn at or above the taxable maximum of $184,500. By 2030, the cap cuts average benefits by 5% among the top 1% of earners, with zero impact on the bottom 90%, also per CRFB modeling. The social security cap proposal does not touch middle or lower-income retirees at all, at least in the early years.

Retirement advocates pushed back hard on the social security funding gap fix, and The Senior Citizens League (TSCL) responded quickly.

The Senior Citizens Leaguestated:

“This effectively amounts to a benefits cut for some Americans, and TSCL’s research finds that 95% of seniors oppose benefits cuts for current retirees, while 66% oppose cuts for future retirees.”

The social security funding gap fix debate also includes several other options. A one-point payroll tax increase, from 12.4% to 13.4%, closes roughly a quarter of the shortfall, and a two-point rise closes about half. Raising the income threshold to cover 90% of all wages, bringing it to around $330,500, closes 26% of the gap. Right now, income above $184,500 faces no Social Security tax at all, and 77% of seniors support eliminating that cap entirely, also according to TSCL data. The social security reform proposals also include retirement age increases, with a one-year rise estimated to close 12% of the shortfall.

CRFB stated in its Six Figure Limit whitepaper:

“As an income support program, there is a good case that Social Security should provide a base of retirement income, not a windfall.”

The broader consensus among retirement researchers right now is that the social security benefit cap proposal alone will not get the job done. Most see it as one piece of a package. Alicia Munnell, senior adviser at the Center for Retirement Research at Boston College, told USA TODAY:

Source: Watcher Guru