Benefit checks are also being reduced by higher Medicare Part B premiums, which are deducted from Social Security benefits. The premiums are set to rise from 5 percent of benefits, on average, for those retiring in 2002 to 9.5 percent for those retiring in 2030. And if you factor in rising co-payments on health care services, most retirees already face living on less.
Taxes further erode benefit payments because the levels at which benefits become taxable — generally, $25,000 for individuals and $32,000 for couples — have never been adjusted for wage growth or inflation. By 2030, more than half of recipients will owe tax on a portion of their benefits, compared with 10 percent when the taxes were first imposed, in 1984.
The upshot is that under current law, Social Security benefits will replace 31 percent of the typical retiree’s preretirement earnings in 2030, compared with 42 percent as recently as 2004, according to the Center for Retirement Research at Boston College. And that includes only the big reductions. Benefits are also smaller because of changes instituted in 1983 that permanently delayed all retirees’ first cost-of-living adjustment for six months. A misguided plan by the Obama administration to cut the COLA as part of a deficit reduction package would add to that cutback.
Social Security benefit cuts are already well under way, and they cannot go much further. Reform should balance cuts with tax increases, including raising the level of wages subject to payroll tax. It should also include a plan to create good jobs and foster immigration, bolstering the income and number of workers paying into the system. There are sensible ways to fix Social Security without undermining it as a support against hardship in old age.
Article Appeared @http://www.nytimes.com/2013/06/10/opinion/whats-next-for-social-security.html?hp