Chances are you recently made a retirement account contribution and filed an income tax return. So while you're thinking about taxes, knock this final assignment off the checklist: Jump onto mysocialsecurity.gov and check out your projected Social Security benefits.
Why now? For many people, this is the one time of year they think about what they are earning in pay and contributing to their retirement accounts. Add in an estimate of what your Social Security benefit might be, you can begin to see how good (or bad) your retirement income picture looks.
Heads up, Gen X: Knock 21 percent off your current estimated retirement benefit. That's the cut benefits will take beginning in 2034 unless Congress acts to reform the program, the Social Security Administration warned seniors in its most recent report. Younger workers are looking at a 26 percent haircut.
If that's a troubling figure _ and your nest egg isn't likely to grow enough to close the gap _ start getting familiar with the various proposals to fix the Social Security shortfall. With all of the other global and political issues hogging the headlines these days, benefits aren't getting much attention, but the problem is still there.
"It's all about whose ox is getting gored," said Joseph Quinn, a Boston College economics professor who assigns students to create their own mix of benefit reductions and tax increases to stem the shortfall. Not surprisingly, his young students, who for the most part aren't yet wealthy, push most of the cuts onto upper-income folks.
In December, Rep. Sam Johnson, R-Texas, unveiled a bill designed to maintain program solvency through the next 75 years by raising the full retirement age for collecting benefits to 69 (from 67 now) and introducing a formula that lowers monthly benefits for most seniors, according to an SSA analysis.
His plan would cut cost-of-living adjustments but would boost benefits for the very lowest earners and extend the age, to 72, that seniors can collect credits for delaying retirement. It would also phase out taxation of benefits, beginning in 2045, and eliminate the earnings test, which suspends benefits for early claimers who are still working.
Spousal benefits would be based on a national average rather than on a worker's specific salary history, which would be a boost to low-income, one-earner families but a big cut for wealthier ones.
This month, Rep. John Larson, D-Conn., and Rep. Brian Higgins, D-N.Y., reintroduced a bill that would also make the program solvent but that reaches the goal in a much different way. It would gradually increase the Social Security payroll tax to 14.8 percent from the current 12.4 percent (employers and workers each paying 6.2 percent), starting with a 0.1 percentage point increase in 2019 until it takes full effect in 2042.
It would apply the Social Security payroll tax on more earnings. Currently, workers pay Social Security taxes on up to $127,200 in earnings. The plan would restart the payroll tax on earnings above $400,000, but a new, highly progressive formula on those earnings would mean only a tiny percentage would be returned to those workers as benefits.
For those costs, beneficiaries would get richer cost-of-living adjustments and higher benefit levels across the income spectrum, SSA found.
How likely are any of these ideas to materialize? Social Security isn't called the third rail of politics for nothing, of course, but Nancy Altman, president of advocacy group Social Security Works, is encouraged by the momentum behind Larson's plan and is hopeful about action next year as the country heads into mid-term election preparations.
"It's getting good traction because it's good policy," she said.
