“…the new budget drastically cuts Social Security benefits for many of those now collecting, drastically cuts benefits for many of those who were about to collect, exacerbates Social Security work disincentive and induces households to do exactly the wrong thing, namely take their benefits too early at the cost of permanently lower benefits.”
Source: Proposed Budget Bill Would Have Devastating Effects on Millions’ Social Security Benefits
Columnist: Laurence Kotlikoff
In a column loaded with scary and inflammatory rhetoric describing Congress’ budget deal as “devastating,” “radical,” and “truly draconian,” Laurence Kotlikoff does his readers and especially Social Security beneficiaries a huge disservice by presenting changes that impact a tiny percentage of Americans as something much larger. At issue is a little-used benefit strategy called File and Suspend. The Budget deal modifies this practice and fixes the unintended consequences (the Social Security Actuary calls it a loophole) in a 2000 Social Security law that allows retirees to file for Social Security and then suspend receipt of their benefits to maximize their Social Security payout. Under the Budget deal, the tiny percentage of beneficiaries (estimated to be about 100,000 people) who’ve used this strategy will be allowed to continue to do so. Their benefits will not be cut. However, Congress is changing this claiming practice for the future. Spouses, divorced spouses, the disabled and children will still quality for their regular earned Social Security benefits much as they have in the past. As the co-author of a how-to book advising people on ways to use “aggressive claiming strategies,” there’s no surprise Kotlikoff finds this provision frustrating; however, these changes are far from “reneging” on Social Security’s promise as claimed in his piece.
The National Committee does not support the Congressional majority’s continuing use of Social Security as a bargaining chip in budget negotiations. However, it’s vital that Americans receive the full story about Congressional action on Social Security, including who is truly affected and in what ways. The Congressional budget deal does not cut benefits and will not impact millions of people, contrary to what was reported by PBS.