14 Jul 2008 — Senior woman paying bills on laptop — Image by © John Fedele/Blend Images/Corbis Credit: Corbis
AMERICANS receiving Social Security payments every month may soon be subject to a benefits cap proposed by a Washington think tank.
The change, aimed at addressing the retirement trust fund’s shortfall, would limit annual benefits to $100,000.
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Experts have estimated that the main retirement trust fund for the Social Security program will be exhausted as soon as 2032.
Should Congress fail to intervene, Americans could see their monthly benefits reduced by as much as 28%, research suggests.
Because millions of older Americans rely on Social Security for all or the majority of their retirement income, such a reduction has the potential to spike the poverty rate among seniors.
In an effort to address the program’s insolvency problems, the nonpartisan Committee for a Responsible Federal Budget (CRFB) pitched a “Six Figure Limit” proposal in March.
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The proposal would set a $100,000 cap on the total payments that couples can receive annually starting in 2026, and a $50,000 limit for a single retiree.
Although the Six Figure Limit would impact the benefits of less than 2% of Social Security recipients, the think tank’s analysis estimated that these numbers will grow over time.
The annual benefits cap would close at least 20% of Social Security’s funding gap, the CRFB projected.
It would also save Social Security up to $190 billion over the span of 10 years, depending on how it is implemented.
“The wealthiest seniors are collecting from Social Security for the first time $100,000 in benefits,” Marc Goldwein, senior policy director at the CRFB, told CBS News.
“This is a program that, when you go back to its founding, was a measure of protection against falling into poverty.
“The fact that an income support program would pay six figures is a little silly.”
The CRFB suggested that the Six Figure Limit could be combined with other possible Social Security reforms to help restore the program’s solvency in a “targeted, timely, progressive, and pro-growth way.”
Critics of the proposal have warned that a benefit cap is a slippery slope and could end up eating into the monthly Social Security payments of the middle class.
To address these concerns and shield the benefits of middle- and low-income households, the CRFB’s proposal suggests indexing the $100,000 benefit cap to inflation.
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