This is addressed to all Congressional members of the Panel.
This is a great opportunity to finally get the ear of Congress. One can send many letters, faxes, and e-mails without knowing whether or not they are actually read by the intended recipient. It appears that these postings are actually being read and responded to.
There have been several references to "maintaining current benefits" but there have also been several allusions to "small" adjustments and "shared sacrifices". However, nothing has really been spelled out. That concerns me greatly. I would like to inject what I consider to be extremely important criteria from the standpoint of current beneficiaries. I don't use the term current "retirees" because many of us MUST continue to work in order to maintain some semblance of the standard of living that we had before.
1. Don't ask us to sacrifice any more than we already are. First, in the name of "saving SS", beneficiaries had to start paying tax on up to 50% of benefits. Next, beneficiaries had to start paying tax on up to 85% of benefits. Then, the CPI formula used to calculate benefit adjustments was finagled downward -- the last one was a lower percentage than used for Congress' COLA.
2. If means testing is started, set a threshold that is realistic. Don't penalize someone who has scrimped and saved over his entire working years in order to be able to have some level of a decent retirement. Start it at a level that would apply to someone who is truly able to afford REAL LUXURIES without SS, allow deductions for high medical expenses, and index it for inflation. Retirees don't contribute to inflation and, if thresholds are not indexed for it, they have no means to compensate for it. They then become victims of something over which they have no control.
3. EITHER: totally eliminate the current taxes on SS benefits, eliminate the taxation on up to 85% of benefits, adjust the threshold incomes to realistic levels, OR at least use net income AFTER IRS allowed deductions (instead of gross income BEFORE deductions) in calculating the taxable amount. The current method is TOTALLY unrealistic -- one can have a gross income that puts him in the 85% range but have high medical expenses that reduce his remaining income down to even below the 50% range. Also, any of these thresholds must be indexed for inflation.
4. Don't get caught up in the notion that ALL beneficiaries will receive benefits that are greater than could be justified by their contributions. That may be true of those who retired in the 80's or earlier, or those whose contributions were average. It is NOT true for those who retired in the 90's and whose contributions were at the maximum rate for 45 or more years -- those individuals will have a negative return on their contributions.
5. Use a realistic CPI formula to calculate COLA's. The currently used CPI is artificially low for the express purpose of reducing COLA's. Even the prior CPI was unrealistic in that it did not use a typical market basket for a retiree. Medical expenses make up a much higher percentage of a retiree's cost of living and that should be reflected in the CPI formula.
Lastly, I'm fully aware that, under the present system, Baby Boomers and GenXer's will experience even a greater negative return on their contributions and that any solution must address this and try to minimize it. However, don't penalize current (or near future) beneficiaries because of it -- we didn't cause or exacerbate it and we have no way to compensate for any reductions in benefits. At least the younger generations have some time ahead of them to compensate for possible reductions in benefits, and they have several tax advantaged means to help them build up a retirement nestegg.
At the risk of opening up a can of worms, the basic problem (the reduction in the ratio of workers to retirees) is due to a declining birth rate and reflects deliberate decisions made by younger generations either to not have children at all or to limit the number to one. Families used to include 3, 4, 5, or even more children. Now, there are many who have chosen careers or life's luxuries instead of any children at all or even marriage. Those were conscious decisions made by the very generations that will be affected by that reduction in ratio and the chickens are coming home to roost. They will have far reaching effects for generations to come.
