Social Security Means Testing Proposals

On Monday, we looked at some of the ways in which Social Security is already means tested (means testing is a method by which the government adjusts benefits depending on the financial situation of each person who applies for Social Security benefits). Even though Social Security already uses aspects of means testing, there are reform ideas floating around amongst politicians as to what other types of means testing would help or not help Social Security.

One of the more common reforms we hear is for income means testing for older Americans who retire. Last summer, Senators Mike Lee, Rand Paul and Lindsay Graham proposed legislation that would raise the retirement age to 70 and would reduce monthly benefits by $300 for seniors making over $43,000. The goal of both of these reforms is to free up money to make Social Security more solvent, as it recently began paying out more in benefits than it is taking in.

One economic think tank, however, found that these reforms may not be enough. The problem, the experts found, was that most Social Security beneficiaries are lower and middle income Americans. 75 percent of benefits goes to people with non-Social Security income of less than $20,000 a year. 90 percent goes to those with incomes less than $40,000 a year. Means testing for older Americans who earn more than $40,000 would not do enough then.

Other concerns about means testing include the fact that it might lead to wealthier Americans’ getting around the testing altogether. The means testing would impose a tax burden on them, and people naturally try to minimize what they have to pay.

Another concern is that means testing would itself add costs to Social Security. From an administrative perspective, retirement benefits are easier to provide than Social Security Disability Insurance benefits and Supplemental Security Income benefits, both of which require means tests, disability tests and a network of investigators, doctors and judges. If retirement benefits added means testing, Social Security’s administrative costs would likely rise.

What kind of an impact would any of the means test proposals have on you and your loved ones?

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