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A Simple (Sorta) Social Security Solvency Fix

Retirement Income

We thought it was a sign of bipartisan hope in an increasingly divided Congress. This month, President Biden nominated Andrew Biggs, a Senior Fellow at the American Enterprise Institute known for his contrarian retirement takes and criticism of financial media sensationalism, to the Social Security Advisory Board.

Biggs, a former principal deputy commissioner of the Social Security Administration, played a part in President George W. Bush’s efforts to “strengthen” (some would say privatize) the popular government program.

The optimism faded when Biggs explained the process.

“A lot of federal boards have to be bipartisan, and the Social Security Advisory Board is one of them, which means that a certain number of the nominees has to be Republican, and a certain number has to be Democrat,” Biggs said. “That leaves independence out twisting in the wind. But, you know, that’s an issue for another day.”

Considered a retirement policy expert, Biggs produces research and papers for AEI, the conservative think tank that counts former Vice President Dick Cheney and former Education Secretary Betsy DeVos as members. He routinely publishes pieces in national news outlets, with his idea for a Social Security fix appearing in The Wall Street Journal.

Still, it’s a bold Biden move.  

“The president had to appoint a Republican, and I’m that Republican,” he added. “It doesn’t mean I would necessarily be his first choice. I would be the first choice of members of the party that he doesn’t belong to. He does it in consultation with Republican leadership and Senator McConnell to work through names. Some on the left get upset at the President nominating this awful Republican. The reality is the law requires it.”

Regardless of his politics, his Social Security experience lends expertise to the board at a critical time for the Social Security Administration, and the program, which he emphasized are two different things.  

“It’s not a partisan job in the sense that you don’t go out and push your agenda. If you look at what the advisory board does, it doesn’t do anything like what people are afraid I might do.”

Cap It

What they’re “afraid he might do” is detailed in his Journal piece, which is to cap the maximum benefit the Social Security pays. The maximum benefit for someone retiring today is a little over $42,000 per year, which Biggs noted is three times the poverty line and two to three times the maximum benefit paid when compared with the UK, Canada, Australia, and New Zealand.

“The way the Social Security benefit formula works is that the maximum benefit can increase every year, so more and more people in the future will be getting more than $42,000 per year,” he said. “My idea is simply to cap it. Just say, ‘Look, we’re not going to do anything else up to $42,000 [linked to inflation], but in future years, $42,000 is all you’re going to get.’ It seems like a not unreasonable idea. It won’t fix the whole problem, but maybe 25% of the problem, something like that.”

He developed it from looking at his own finances and realizing that when he and his wife retired, they’ll receive as much as $70,000 from the program alone.

“In real dollar terms, $42,000 grand is more than enough. Maybe it’s gimmicky, or it’s too simple. Still, it’s just saying that given that high-income Americans are saving more for retirement than ever and their incomes are higher in retirement than ever, then $42,000 is enough.”


All comments
Joseph Gordon
8 months 2 hours ago
A simple cap is not fair to those boomers who have paid in for 40+ years and now are getting ready to retire. A better fix is to give a tax credit of 70% of the scheduled benefit as an opt out. In that way, the trust fund pays out nothing and each opt-out beneficiary gets 70% of the $42,000 as a tax credit against other income. Since the trust fund is a mirage in the desert, it shouldn't be a problem.
Terrance Power
8 months 5 hours ago
What about current (or newly) retirees who didn't have the luxury of assuming there would be an inflation cap? What if inflation comes back with a vengence? Will there be a refund of the hundreds of thousands of dollars paid into the program by workers and their employers if they die before (at least) receiving the money paid into the program? Our government can't even run a Ponzi scheme effectively. smh. This might make more sense for younger workers who still have time to put away money into qualified plans (those under 50 or so), but for older workers this is a disaster.
Steven Hiraga
8 months 1 hour ago
To be fair, the article does say linked to inflation. The cap is not a perfect solution but I don't think it's unreasonable. We all know the people hitting near the cap are the people who need it the least from a retirement income standpoint. So in the spirit of fixing social security, that is one of the more obvious places to look aside from as I understand it, a relatively small tax increase. Probably gonna take a combination of a few changes.