Have not seen many details for the administrations' plans in this regard yet, but one thing for sure is that they are going to suggest both cut in future benefit as well as the partial privatization. As for the cut, they want to change from wage-indexing to price-indexing. You may want read this.
miami.com
Bush plans to cut back Social Security benefits
"COMPLEX FORMULA
Currently, initial benefits are set by a complex formula that calculates workers' average annual earnings in their 35 highest-paid years and adjusts those earnings up from those years to reflect standards of living near that worker's retirement age. That adjustment is based on wage growth over that time span. Under the commission plan, the adjustment would be based instead on the rise of consumer prices.
The change would save trillions of dollars in scheduled expenditures and solve Social Security's long-term deficit, but at a cost. According to the Social Security Administration's chief actuary, a middle-class worker retiring in 2022 would see guaranteed benefits cut by 9.9 percent. By 2042, average monthly benefits for middle- and high-income workers would fall by more than a quarter. A retiree in 2075 would receive 54 percent of the benefit now promised.
While no decision has been made, allies and opponents expressed little doubt about where the president is heading.
`NO DECISION'
''No decision has been made, but the administration is clearly leaning in that direction,'' said Michael Tanner, director of the libertarian Cato Institute's Project on Social Security Choice. ``I don't think anything else is seriously on the table.''
...
Last month, the council's chairman, N. Gregory Mankiw, fingered the current system of ''wage indexing'' as a primary culprit for Social Security's problems.
''A person with average wages retiring at age 65 this year gets an annual benefit of about $14,000, but a similar person retiring in 2050 is scheduled to get over $20,000 in today's dollars,'' Mankiw said at the American Enterprise Institute. ``In other words, even after adjusting for inflation, a typical person's benefits are scheduled to rise by over 40 percent.''
...
Opponents of the proposal have also been mobilizing. Under an inflation-linked formula, benefits would keep up with prices, but wage levels determine standards of living, Rother said. Social Security benefits currently equal 42 percent of the earnings of an average worker retiring at 65. Under the new formula, that benefit would fall to 20 percent of pre-retirement earnings. Future retirees would, in effect, be consigned to today's standard of living." |
