Fix Social Security – but base it on facts. Who receives more generous benefits?

A recent survey asked Americans what changes they could accept to make Social Security solvent. As you may expect, changes that don’t affect average citizens are top of the list. Here is an example.

Reducing benefits for high earners

  • Share in support: 81%
  • Democrats in support: 86%
  • Republicans in support: 78%

Wealthier retirees generally receive more generous benefits, even though they likely have more ways to fund their retirements, such as through pensions and savings. Means testing benefits for those with certain wealth or income could be another way to help reduce the program’s shortfall.

This would reduce the amount of benefits the top 20% of earners receive, and would reduce the shortfall by 11%.

That highlighted statement, while generally accepted as fact, is not true! In addition, it’s not the wealthy who have – the relatively few – pensions, but union and government workers.

Means testing is counter to the basic design and purpose of Social Security as originally conceived. Several features already even the playing field. That includes the benefit formula, the taxation of benefits and the use of earnings only subject to taxation in the calculation of benefits.

Here’s how Social Security favors lower income workers.

PIA definition
The “primary insurance amount” (PIA) is the benefit (before rounding down to next lower whole dollar) a person would receive if he/she elects to begin receiving retirement benefits at his/her normal retirement age. At this age, the benefit is neither reduced for early retirement nor increased for delayed retirement.

PIA formula bend points
The PIA is the sum of three separate percentages of portions of average indexed monthly earnings. The portions depend on the year in which a worker attains age 62, becomes disabled before age 62, or dies before attaining age 62. 

For 2023 these portions are the first $1,115, the amount between $1,115 and $6,721, and the amount over $6,721. These dollar amounts are the “bend points” of the 2023 PIA formula. A table shows bend points, for years beginning with 1979, for both the PIA and maximum family benefit formulas.

PIA formula
For an individual who first becomes eligible for old-age insurance benefits or disability insurance benefits in 2023, or who dies in 2023 before becoming eligible for benefits, his/her PIA will be the sum of:

(a) 90 percent of the first $1,115 of his/her average indexed monthly earnings,

plus (b) 32 percent of his/her average indexed monthly earnings over $1,115 and through $6,721,

plus (c) 15 percent of his/her average indexed monthly earnings over $6,721.

This is how the Social Security Administration explains the benefit calculation

As you can see, higher income retirees do not receive more generous benefits, based on the benefit formula, their benefit is less generous.

How do we define “wealthy?” For the purpose of Social Security benefits, no pay above the taxable wage base is counted for benefits or taxes. For 2023, that amount will be $160,200 (up from $147,000 for 2022).

Let’s look at an example of benefits based on income. Two workers; both retire at the same full retirement age, one was earning $35,000 per year at retirement, the other earned $135,000 and of course, paid the same tax rate on those earnings.

It’s obvious the higher paid person paid more in taxes. Following is the difference in benefit payments.

Earning $35,000 = benefit of $1,172.00. = $14,064 per year or 40% of final working income.

Earning $135,000 = benefit of $2,686.00 = $32,232 or per year 24% of final working income.

So, which person receives the more generous benefit from Social Security❓40% versus 24%


  1. Actually, the system is even more skewed in favor of individuals with consistently lower wages over their lifetime.

    First, Social Security taxes are paid with after tax dollars.
    Second, the higher taxes paid by both the employee and employer reduce other rewards and benefits the employer might have otherwise provided (mandatory? Yes; cost of doing business? Yes; part of total rewards? Yes; reduce what the employer would otherwise pay, YES!
    Third, on the other end, because the exclusion from income taxes is not indexed for inflation, the $25,000/$32,000 is a much larger portion of the benefits lower income Americans receive.
    Fourth, you have to also consider Medicare. Clearly, there, Medicare is dramatically skewed in favor of lower income retirees, especially the dual eligible. Remember that there is no cap on the FICA-Med taxes, and that 75+% of Medicare part B and Part D costs are paid with general revenues (the ~50% of Americans who pay income taxes).

    Members of Congress and the academics and press continue to lie. Americans want to believe you can solve the funding woes by taxing the “rich”. All lies.


  2. The higher earners receives the more generous benefit from Social Security. The numbers tell the whole story. The higher paid worker will get everything paid in FICA taxes back in 8 to 10 years, just like the lower paid worker and then receive more money than the lower paid worker, in total benefits. Total benefits is the correct way to look at SS, not percentage of income replacement.

    Economist Melton Freidman called Social Security the biggest wealth transfer to the rich ever devised.


  3. “Means Testing” = welfare. H3ll no! I’ve based my retirement plan on that statement they send me every year and my “generous” pension is what’s left of an Army enlisted pension after the courts gave almost half to my ex-wife. I shouldn’t have to pull back on my chosen lifestyle so some politician can look like a saint (instead of an “ain’t”) come election time.


  4. “Earning $135,000 = benefit of $2,686.00 = $32,232 or per year 24% of final working income. ”
    I never earned $135k/yr, but my PIA is greater than $2686 even before adding in COLA increase for 2023. Not sure how you got your numbers.


    1. The figure is right for a person earning $135,000 AT THE TIME THEY RETIRE (less of course during previous years) at their full retirement age. Using the SSA quick calculator.


  5. I think “means” testing should look at taxable income vs SS payments themselves. Of course, the percentage of SS payment to higher salary person would be lower.


    1. The very foundation of SS was a self funded program with dedicated taxes treating everyone equally relative to taxable income. To means test means it becomes a welfare program. I would not like to see that happen.


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