“Alternative Contingency Policies for When the Social Security Trust Fund Is Exhausted,” by Mark J. Warshawsky, AEI
Quote: “In a recent working paper, I discussed what could happen if the Social Security Trust Fund were exhausted in 2032, as currently projected, and Congress, gridlocked by politics, did not agree in time on a fix, temporary or permanent. According to the Trustees, total retirement and survivor benefits would then have to be cut by 24 percent (according to the Congressional Budget Office, 28 percent) to balance outgoing payments with incoming revenues, as required by law. These cuts do not necessarily have to be across the board, according to the analysis by Biggs and Shapiro (2024). They instead proposed a monthly benefit cap of $2,050 for all retired and survivor beneficiaries as sufficient to balance the system. In my working paper, I alternatively suggested that a means test based on individual net worth be employed, roughly modeled on the Australian general pension plan, because the cap would jarringly hit the oldest retirees while sparing those with lower benefits even if they had high net worth and ample retirement resources. Based on the parameters of the Australian test and data from the Health and Retirement Study (HRS), adjusted to recent US asset values, I found that restricting cuts to non-disabled beneficiaries ages 62 to 74 with individual net worths greater than $470,400 (partial cuts) and $785,400 (complete cuts) would be sufficient to balance the Social Security system in 2032. The net worth measure includes the market value of residences and all retirement assets, including the actuarial value of defined benefit pensions, and household net worth is split in half for couples.”
LTC Comment, Stephen A. Moses, President, Center for Long-Term Care Reform:
Remember when Social Security was supposed to have the dignity of private insurance? You pay in; you get something back. Now SS has to be converted explicitly into means-tested welfare to save it from insolvency. Furthering the irony, explicit welfare programs like Medicaid and Supplemental Security Income have become de facto entitlements available to the middle class and affluent who know how to manipulate them. For examples and consequences, read the Paragon Health Institute’s “Long-Term Care: The Problem” and “Long-Term Care: The Solution” and watch this “virtual LTC event” featuring age wave visionary Ken Dychtwald and leading LTC researchers. To find ample private funds for LTC, check out “Medicaid’s $100+ Billion Leak.” For what not to do, see “Medi-Cal-amity: California’s Reckless Expansion of Medicaid Long-Term Care to the Affluent.” Much more on long-term care here.