Calls for higher Social Security benefits abound. For most people the initial benefit they receive equals only 40% of their pre-retirement income. Is that a livable income as they say?
Let’s see how that may work using the CRFB estimator.
We’ll increase the initial monthly benefit by 50%
To pay for that we need more money. Assume we increase the employee payroll tax rate by 5% to 11.2% and we subject all wages to the higher tax. That’s a lot of new taxes.
And yet Social Security remains insolvent. The trust fund will run out in 2067 at which point all beneficiaries will face a sudden 15% benefit cut.
It’s not easy paying for what we want.