New Proposal Caps Social Security COLAs for High Earners NOW

UPDATE: A groundbreaking proposal has just been announced that seeks to cap annual Social Security Cost-of-Living Adjustments (COLAs) for high earners. This urgent measure, introduced by the Committee for a Responsible Federal Budget (CRFB), aims to stabilize the program’s finances without compromising inflation protections for the vast majority of beneficiaries.

Social Security is under severe financial strain, with projections indicating that the retirement trust fund could run dry within the next decade. If Congress fails to act, retirees may face a staggering cut of around 24 percent in benefits by late 2032. Over 50 million Americans depend on Social Security payments as a critical source of income, making this proposal a pressing concern.

The CRFB’s white paper suggests that while everyone would still receive a COLA, retirees with the highest benefits—typically those who had the highest lifetime earnings—would see their increases limited to a predetermined dollar amount. For example, if inflation in 2035 results in a 2 percent COLA and the cap is set at $900, a retiree receiving a $50,000 annual benefit would normally receive a $1,000 increase. Under the proposed cap, however, they would only get $900, while those earning $45,000 or less would see no change.

The CRFB claims this approach could save $115 billion over the next decade, effectively addressing approximately one-tenth of Social Security’s long-term funding shortfall. Setting the cap at the 50th or 90th percentile could yield savings ranging from $35 billion to $385 billion, significantly reducing the program’s 75-year solvency gap.

Officials state: “A COLA cap could meaningfully and quickly improve the solvency of Social Security’s trust funds while concentrating adjustments on those most able to bear them.” This initiative aims to maintain full inflation protection for most beneficiaries while ensuring that the burden of financial adjustments is equitably distributed across generations.

As discussions unfold, some lawmakers are considering alternative strategies to bolster Social Security. The Fair Share Act, spearheaded by Democrats Sheldon Whitehouse and Brendan Boyle, proposes a tax increase on individuals earning over $400,000. This measure seeks to enhance Social Security and Medicare funding by ensuring that top earners contribute fairly.

Additionally, a bipartisan proposal from Republican Senator Bill Cassidy and Democratic Senator Tim Kaine aims to establish a new investment fund, separate from the existing Social Security trust funds. This fund would diversify investments beyond U.S. government bonds to include stocks and traditional bonds, potentially generating higher returns.

The urgency for reform is palpable as millions of retirees face an uncertain future. The implications of this new proposal could ripple through the lives of many, making it vital for lawmakers to act swiftly. The next steps are crucial: Will Congress embrace the proposed COLA cap or explore alternative solutions?

Stay tuned for more updates on this developing story as it impacts the financial security of countless Americans.