According to a new study from the National Center for Policy Analysis (NCPA), reforms that cut Social Security benefits could result in a net gain for younger workers.
While such a change would mean reduced benefit payments upon and following retirement, cuts in benefits should also mean a reduction in payroll taxes. The study found some models indicated payroll tax cuts might result in gains exceeding the decrease in retirement benefits.
The NCPA examined four reforms that have been commonly discussed, and calculated their effects on average single males aged 26 and 41. In both cases, the study found raising the retirement age to 70 by 2032 and then increasing it by one month every two years would likely result in the greatest net loss when both reduced lifetime benefits and lower taxes were accounted for.
Changing the benefit formula to reduce monthly checks would result in gains of more than $4,500 for the older group, and a loss of less than $2,000 for the younger group. The other two options, eliminating the maximum taxable wage and implementing progressive price indexing, resulted in net gains of more than $30,000 for both groups, with larger gains for the younger demographic. If these changes are implemented, it may result in less concern about employee benefits and retirement by supporting financial stability for workers.
