This Social Security Blueprint Would Raise Retirement Age for High Earners

During an event at Brookings in Washington Thursday, Primus also said that "Medicare needs to be extended to cover long-term care needs."

No Benefit Cuts

The plan "falls into a classic DC insider trap of focusing on a so-called balanced package of benefit cuts and revenue increases," Nancy Altman, chair of the Strengthen Social Security Coalition, told ThinkAdvisor Thursday.

"Poll after poll has shown that the American people, including Democrats, Republicans, and independents, overwhelmingly oppose any cuts to Social Security," Altman said. "Instead, they want to make the wealthiest Americans pay their fair share into the system."

The National Committee to Preserve Social Security and Medicare said Thursday that while the group commends the Brookings' authors for "offering a thorough, bipartisan proposal to strengthen Social Security, we object to benefit cuts of any kind."

"In one of the wealthiest countries in the world, seniors and other beneficiaries should not be asked to bear the burden of improving the program's finances," said Dan Adcock, director of government relations and policy at NCPSSM. The group, Adcock said, prefers solutions in Rep. John Larson's Social Security 2100 Act, "which would extend trust fund solvency without benefit cuts, by asking the wealthy to contribute their fair share."

A 'Convoluted' Plan

The plan's increase in retirement age for high earners "is a benefit cut to people who paid into the system their entire careers," Adcock said. "If the door is opened to increasing the retirement age, what is to stop future Congress from the lowering or ending the income threshold to which the benefit cut applies? The way for high earners to help with solvency and improve benefits is to have people with incomes over $400,000 pay their fair share of FICA taxes."

Maria Freese, senior legislative representative at the National Committee to Preserve Social Security and Medicare, added that "Not only would the Brookings proposal raise the retirement age, but they do it in what might be the most convoluted way possible — which is perfectly rational for an academic but would be extremely confusing for the average Social Security Administration worker."

Your retirement age under the Brookings plan, Freese explained, "would depend on your average lifetime income — so for people whose incomes fluctuate dramatically, especially as they get older and approach retirement age, you might never know exactly when you can retire with full benefits. The top 2 quintiles kick in at about $100,000 of income — which is not exactly the wealthiest workers. So, your retirement age would change not only based on your birth year but also your lifetime income."

The plan's "high earners in the context of Social Security are solidly middle class," added Altman. "Raising their retirement age is simply a benefit cut, when those workers are facing a retirement income crisis."

This aspect of the plan "would also be very difficult, if not outright impossible, to administer," Altman opined. "People earn different amounts throughout their careers. They may spend some time in physically demanding jobs and other times not. Again, the American people and most experts agree — benefits are too low. If we want to ensure that truly high earners don't inappropriately benefit, Congress should require them to contribute more — what most of us believe is simply their fair share."

Further, "the breakpoints of the income quintiles differ between men and women — as does life expectancy," Freese added. "The proposal isn't entirely clear about whether it would have different retirement ages for men and women, but the authors talks a lot about differences by gender so if you follow this rationale to its logical extreme, that’s what you would end up with."

New Earnings Calculation

The Brookings proposal would also increase the number of working years used to calculate Social Security's average indexed monthly earnings.

Under current law, the average indexed monthly earnings (AIME), which is the basis of a worker’s Social Security benefit, is calculated using the worker’s highest 35 years of earnings, the paper states.

The proposal changes the AIME formula to use the highest 40 years of earnings. "The number of years included in the formula would increase by one every two years, beginning in 2032," the plan states. "In 2032, the highest 36 years of earnings would be used. In 2034, the highest 37 years would be used. As such, in 2040, the highest 40 years would be used."

Such a change "is a benefit cut that would impact all beneficiaries," Adcock said. "Why are benefit cuts a good idea when a growing share of Americans depend on Social Security for all or most of their income in retirement?"

As to taxing all Social Security benefits of high earners, Adcock relayed that such a move "seems too tone deaf to our current political reality. President Trump wants to eliminate taxes on Social Security benefits, while advocates warn that doing so without a 'pay for' would expedite the depletion of the Social Security trust fund."