Retirement Income Journal
The information forum of the decumulation industry.

A new report from the Urban Institute claims that if the Social Security reforms recommended by the National Commission on Fiscal Responsibility and Reform a year ago were adopted, the Social Security benefits received by adults would decline relative to benefits currently scheduled.

In 2070, when all of the proposed provisions would be fully phased in, average benefits would be 14% lower for those in the middle of the earnings distribution, the Urban Institute report said.

While the proposal largely preserves scheduled benefits for those in the bottom earnings quintile, they would experience a projected 3% benefit reduction primarily because of the proposed COLA changes—despite the inclusion of several benefit enhancements for recipients with low lifetime earnings.

For those in top earnings quintile, projected benefits would fall by about a quarter. As a result, their projected first-year replacement rates from Social Security will decline markedly for future generations, along with their return from the payroll taxes they pay over their lifetimes. These declining returns could erode political support for OASDI.