Revealing Numbers from the Social Security 2100 Act — Slanting the debate, very sad

Here is an example that I find particularly misleading. The key to understanding  this discussion of replacement rate is the word “earnings,” but because of the variables the word can be used to mislead.

Look below and you see 95% of prior earnings, what earnings?

To be more specific, look at the claim of 80% replacement rates. Technically correct, but when you read the assumptions you get a different picture. Here is what the CBO Report actually says:

“Because of the progressive nature of Social Security’s benefit formula, replacement rates are much higher for workers with lower earnings. For example, the median replacement rate based on all earnings from age 22 through age 61 is 80 percent for workers born in the 1960s whose lifetime earnings fall in the lowest earnings quintile, more than double the 34 per- cent for workers whose earnings fall in the highest quintile.”

The 80% is based on replacement of career (lifetime) earnings. That is irrelevant ‼️

A worker earning a low $20,000 in 2019 will receive about 53% replacement of that $20,000 based on the SS Quick Calculator. A worker earning $135,000 receives about 21.5% replacement.

When a worker retires, what matters is the income at the time of retirement which is what had determined their standard of living.

Retirement benefits for the lowest-income quintile of workers would exceed 95% of their prior earnings. A “replacement rate” is the percentage of one’s earnings as a worker that one’s subsequent retirement income is sufficient to replace. Most advisors recommend that individuals save enough to finance replacement rates of 70%-80% in retirement. According to data published earlier this year by the nonpartisan Congressional Budget Office, Social Security by itself already pays an average replacement rate of 80% for those in the lowest-income quintile.

The bill would increase these benefits, pushing these workers’ replacement rates above 95% on average. Combined with the bill’s tax increases, this means that low-income workers would not be able to amass retirement saving on their own without pushing their standard of living during their working years far below what they expect to experience as retirees.

Source: Eight Revealing Numbers from the Social Security 2100 Act | Economics21


  1. First, thanks for posting about the proposed Social Security 2100 Act. As a result of reading your previous post about it, I looked it up and read the entire text of the Act. This is not light reading needless to say.

    I believe based on what I do understand that it has a good chance of passing. What I don’t know is how the Congressional Budget Office scores this.


  2. I quit working at 50, because I had a military pension to pay for the basics. I did use credit cards over the next 12 years and run up $28,000 in debt, my bad for sure. I started getting SS at age 62 to avoid bankruptcy, as I was just making minimum payments on the debt. I considered going back to work, but the 3 jobs I interviewed for were filled by younger workers. I was told they were looking for someone who would be with them for at least 5 years, something they did not think I would do, once my debt was paid off.

    I have paid off 18,000 of the debt and transferred the rest to zero interest accounts and it will all be paid off in May of 2020.

    Using your numbers the low income worker will get $883 per month and the high income worker will get $2,418 per month.

    I was a low income worker my whole life never making more than $26,000 per year (1995) and just $6,700 part time in 2006. My average income for the 27 years I had SS taxable income was $11,222. When I started SS at 62 my benefit amount was $872 per month, almost as much as my average earnings. With my wife’s spousal benefit of $416 it put us at $1288 per month in total benefit. I am very glad I have a military pension, because it would be very hard to make it on just the SS benefit.

    When you look at the difference in SS benefit check amounts between the low income worker and the high income worker, you realize life is not fair.

    The low income worker never had extra income to save anything for retirement. If I was going to change anything about SS I would give every worker the same amount each month, no spousal benefit amount, but the spouse would get the retiree’s benefit, upon their death, like it is now.

    Many will say this is not fair, but it would do what SS was intended to do, keep retirees out of poverty. As economist Melton Friedman said “SS is the biggest wealth transfer to the rich ever devised.” The windfall that the rich receive, even though it is a lower percentage of their average income, is many times just extra money in their budget. That is why I am for every worker to get the same benefit amount.

    This could be done by having employers pay in the same amount for each worker, not based on income, but based on projected future SS benefit. I know this will never happen, because companies have way more low income workers, than high income workers and they would fight the change.

    The biggest thing any worker can do before retirement is get out of debt, that way you will not need anything close to 100% replacement of income.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s