Serious Financial Repercussions if Social Security Benefits Cut by 20%

Author: The Senior Citizens League
Published: 11 Jun 2015

Table of Contents:
Synopsis - Overview - Related Content

Synopsis

Serious financial repercussions likely for beneficiaries if Congress does not act in time to fix the Social Security Disability Insurance program.

Overview

A new poll by The Senior Citizens League (TSCL) found that there would be serious financial repercussions for beneficiaries if Congress does not act in time to fix the Social Security Disability Insurance program.

The poll asked "How would a 20% Social Security benefit cut affect you"

• 57% of participants said they wouldn't be able to afford one or more basic essential needs like housing, food, or medicine.
• 27% said they would have to spend through savings faster than planned, and,
• 14% said they would be forced into debt.
• Only 2% said "no big deal."

The poll was open to current Social Security recipients and anyone with an interest in Social Security retirement, survivors, or disability insurance benefits.

The scenario is not as hypothetical as some may think.

The Social Security Trustees project that by the end of 2016 the Social Security Disability Insurance trust fund, which operates separately from the retirement and survivors trust fund, will be insolvent, and unable to pay disability benefits in full. When that happens disability benefit payments would have to be reduced by about 20% to match tax revenues coming in. "So far Congress has not made public any plan to prevent this from occurring," observes TSCL Chairman, Ed Cates.

Social Security disability benefits are paid for through payroll taxes.

Benefits are calculated based on the disabled worker's earnings history and the length of time worked. A total of 10.9 million disabled beneficiaries receive a monthly benefit averaging about $1,017.

According to TSCL's annual "Senior Survey" conducted earlier this year, nearly one in three survey participants, 31%, said they had no other retirement income, like pensions or savings, in addition to Social Security.

The survey found no support for fixing the Social Security disability or retirement programs by cutting benefits, other than measures to reduce fraud and abuse.

The survey found instead that 70% of respondents support raising the taxable maximum wage cap to apply the Social Security tax to all earnings. Currently the highest income workers, earning more than $118,500 per year, pay nothing on earnings over that amount.

In addition, the survey found that 45% favored very gradually increasing the payroll tax rate by 1% each for all workers and employers versus 30% who opposed the proposal.

"TSCL believes that the Social Security Disability program's solvency can be addressed without benefits cuts, without running down the clock and without turning Social Security into political football," says Cates.