When the Social Security Retirement Trust Fund is exhausted in 2032, old-age and survivor benefits in total must be cut by 24%, according to current projections. If implemented as an across-the-board cut, it would hit the poor particularly hard. But there are other, fairer ways of allocating the cuts, including limiting benefits to a certain dollar amount. As the empirical analysis here shows, however, that policy would harm those with relatively high benefits but low or modest net worths, some young survivors, and those of advanced age; it would not touch those with high net worths but relatively low benefits—for example, non-working spouses and early retirees. Instead, an alternative temporary policy on the contingency that Congress does not act before exhaustion could be based on one prong of the asset means test used in the age pension program in Australia. Restricted to those ages 62–74 and excluding the disabled and those with net worths measured on an individual basis below 470, 400, in 2025 dollars, with partial cuts for those with individual net worths below 785, 400 at the median benefit, the balance of benefits and revenues would be achieved. Still other net worth means tests are possible, possibly extending to longer-term reforms. These alternative contingency policies highlight the real policy question of whether payroll or other taxes should be raised in any eventual reform package to preserve high levels of scheduled Social Security retirement benefits being paid to rich people.
Mark J. Warshawsky (Mon,) studied this question.