The Employment Benefit Research Institute (EBRI) has released another part of its ongoing study to determine the impact of potential changes to the Social Security system upon future retirees.
While many Western democracies that suffer from the same problems as the U.S. have taken steps to address the inadequacies of their current social security systems, nothing has as yet been done in this country.
Because various Social Security reform alternatives under consideration would phase in benefit reductions, the cuts for younger workers would be larger than the cuts that middle-age or older workers would experience, the EBRI says in the most recent component of its ongoing study, which builds upon results released in April. For example, the benefit cuts for those born in 1962 would range from a $300 decrease in annual benefits for beneficiaries with the smallest benefits to about $3,000 for those with the highest benefits. These annual reductions would grow steadily across age cohorts, reaching $2,200 to $10,370 for the 1997 birth cohort and from $3,790 to $18,360 for the 2022 birth cohort.
While the projected real growth in wages has the effect of providing higher real Social Security benefit levels for the younger age groups, even with benefit reductions, “various studies have shown that, even with current-law benefits, many future retirees will not have enough resources to maintain the same level of standard of living throughout retirement,” EBRI says.
Most Americans would need to save additional amounts just to make up for the reductions in current-law Social Security benefits. But even then, EBRI says, their level of resources would still be inadequate to maintain the same standard of living throughout the remainder of their lifetime, so any reforms that reduce the benefit levels of Social Security will have the most impact upon lowest-income beneficiaries, who depend on the program the most, and for whom saving additionally through their working life is an arduous, if not near impossible task.