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Former Senator: Social Security Payouts Should Be More Progressive

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Bob Kerrey, a former U.S. senator and ex-governor of Nebraska, says he has one idea on the top of his retirement policy wish list in 2015: making Social Security payouts more progressive.

That means paying out higher benefits to low-income retirees – especially those who depend on Social Security for most, or all, of their income.

Social Security’s benefit formula is already progressive, but Kerrey’s proposal would make it more-so.

Kerrey further explains his idea in the Wall Street Journal:

To understand what Congress must do you need to understand how the benefits are calculated. While the payroll tax is regressive, the benefits are progressive. Under current law the monthly benefit will be equal to 90% of the first $826 of average indexed monthly wages plus 32% of average indexed earnings from $826 to $4,980, and 15% over $4,980.

Congress should raise the replacement percent of the first bracket to 100%. And they should raise the wage point to $1,150. This is the current take-home pay after payroll taxes for minimum wage workers.

The Social Security actuary can answer the question about the detailed impact of this increase. I do not need an actuarial analysis to know what a few hundred dollars a month can mean to older Americans who worked all their lives for low wages and employers without retirement programs.

Kerrey acknowledges that a more progressive benefit structure will help low-income retirees now, but could stretch Social Security very thin for coming generations.

To read more about benefit formula adjustments, click here and here.

 

Photo by 401kcalculator.org

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