Many Americans, particularly pre-retirees, are worried about the Social Security cuts recently discussed in Congress. But they may not be aware that cuts already enacted will affect their benefits.

In the 1980s, Congress enacted changes to Social Security to ensure the program's long-term solvency. Those changes will cut retirement benefits by 19 percent for workers born in 1960 and later, and more cuts could undermine the basic economic security of future retirees, according to a new report released by the National Academy of Social Insurance.

The report said that modest benefit improvements and revenue increases are affordable, have broad public support, and can close Social Security's long-term financing shortfall without more benefit cuts.

"Social Security benefits are already being cut more than many people realize," said Virginia Reno, NASI's vice president for income security and co-author of the report in a statement. "Cutting benefits further is not necessary to preserve Social Security for future generations. Other alternatives merit consideration by policymakers."

As Congress considers further benefit cuts, the NASI report said it is important to remember that the 1983 cuts relied far more on benefit decreases than revenue increases to balance the system's long-term finances.

The 1983 amendments included:

Raising the retirement age from 65 to 67, a change that results in a 13.3 percent cut in benefits.
Taxing part of benefit income, which results in a 5.1 percent benefit cut.
Delaying the cost-of-living adjustment by six months, resulting in a permanent 1.4 percent cut.

"The first two cuts are phasing in gradually," the report stated. "The 13.3 percent cut affects new retirees born in 1960 and later; they will begin reaching age 65 in 2025 and age 90 in 2050. By then, almost all of the elderly will have experienced the full 19 percent reduction in Social Security.

According to the report, the 1983 changes are typically described as a balanced plan of benefits cuts and contribution increases. But the report said that the benefits cuts are not being balanced by any new contributions.

Social Security benefits average about $14,000 a year, but two in three elderly beneficiaries count on their benefits to provide at least half of their total income. In the future, rising Medicare premiums, which are deducted from benefits, will continue to erode their value.

Although Social Security beneficiaries will increase as a percentage of the population from 17 to 25 percent between 2010 and 2085, Social Security payments as a percentage of gross domestic product are projected to rise only from 5 to 6 percent during the same period.

The report finds that by adopting a balanced long-term revenue plan it is possible to cover the projected shortfall facing Social Security while making modest improvements in the program for three vulnerable groups – low-paid workers, the oldest beneficiaries and students who lose parental support due to death or disability. The revenue plan could include gradually lifting the cap on FICA payroll tax contributions to again cover 90 percent of earnings as Congress intended and scheduling small FICA rate increases over 20 years starting in 2015.

Boosting revenues would have the support of the American public, the report states, noting that in repeated public opinion polls, Americans across political parties and age groups have stated they would rather pay more than see Social Security benefits cut.

Instant Insights /

Future retirees will see 19 percent cut in Social Security benefits

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