The Associated Press misled its many readers, unfortunately, about what is a Social Security benefit cut and what is not. A piece published August 27, one in a series the AP has been running, purports to break new ground in gauging public sentiment about the government’s largest social program. In other polls, the AP said, “most of the options for addressing Social Security scored poorly among the public, which helps explain why Congress hasn’t embraced them.” But the AP said its poll, conducted in mid-August, “forced people to make a choice: Raise taxes or cut benefits? Raise the retirement age or cut monthly payments?”
The problem? The AP didn’t tell survey responders or its readers that raising the retirement age is a cut, a big one that will result in smaller monthly benefits.
The AP’s lede:
Most Americans say go ahead and raise taxes if it will save Social Security benefits for future generations. And raise the retirement age, if you have to. Both options are preferable to cutting monthly benefits, even for people who are years away from applying for them.
The AP’s survey question:
If you had to choose, which would you prefer? Raising the age at which people can get Social Security but keeping monthly benefits the same for everyone, OR keeping the age at which people can get Social Security the same as it is now, but reducing monthly benefits for future generations.
Fifty-three percent of the people told the AP they preferred raising the age, while 35 percent would keep the retirement age the same as it is now and cut benefits for future generations.
Raising the age to collect full benefits is one way to cut the program’s outlays that does indeed result in a benefit cut. Three decades ago Congress enacted legislation to gradually raise the retirement age from 65 to 66, and eventually to 67, because it needed to put the system on firmer financial ground. That change will result in about a 13 percent across the board benefit cut when it is fully phased in. Of course, people can always retire early, before age 67, and most do. But their benefit will be lower than what they would get under current law, no matter when they take it, because of the way the benefits formula is calculated. People can also work past normal retirement age, and they would still receive a lower benefit than they would under current law, due to that formula.
Raising the full retirement age further will result in similar benefit cuts. According to Nancy Altman, a widely respected Social Security expert who also co-directs the advocacy group Strengthen Social Security, benefits can be cut in many ways, including changing the way they are calculated or raising the retirement age. “Those two options can be structured so they are mathematically indistinguishable for retirees, giving the same result and providing the same monthly benefit,” she told me. “If Congress changes the law to set the retirement age for full benefits at 69, people will receive a monthly benefit that will be about 13 percent lower than it would otherwise be.”
Altman gave an example. Suppose a worker born in 1960 retires at age 67 and is entitled to a monthly benefit of $1000 under current law. In this example, if the retirement age to collect full benefits were 69, that same worker with the same earnings record, retiring on the same exact date, would receive $867 monthly—$133 less, or a reduction of about 13 percent—for the rest of his or her life, aside from cost of living adjustments.
The AP’s question, though, seems to incorrectly assume that raising the retirement age is not a benefit cut. What would the results have been had the question been worded something like this: “Would you prefer to raise taxes, or to cut benefits by raising the retirement age or cutting benefits in other ways?
Raising the age is high on the agenda of those who want to cut Social Security as part of any deficit deal Congress may make after the election. All options to reduce benefits are in play in ongoing Beltway discussions over fixing Social Security, which is projected to be able to pay full benefits until 2033, but only seventy-five percent of benefits after that, unless Congress changes the law. So far, the political climate has not permitted a robust discussion of other approaches, such as raising payroll taxes either outright, or by increasing the amount of wages subject to Social Security taxes—currently $110,100.