9.2: Need Basis
Limit Social Security to Those Who Actually Need It. Other Information:
Limiting Social Security to Those Who Actually Need It. In addition to moving to a flat benefit over time, the plan makes
Social Security a properly financed, true insurance program. It starts to do that immediately. This means that the program
will concentrate on protecting the economic security of retirees rather than following the current approach of promising unaffordable
benefits to all without regard to need. This new approach means that retirees with substantial non-Social Security retirement
income will start receiving a lower benefit on a sliding scale that gradually reduces Social Security checks to zero for those
with the highest non-Social Security incomes. This transparent mechanism will apply to benefits received by affluent Americans
under both the current system and the flat-rate system. This transparent, sliding-scale approach is a major improvement on
today's taxation of Social Security benefits. Under the plan, income-adjusted benefits start in 2012 as individual retirees
with non-Social Security incomes above $55,000 start to see a slight reduction in benefit payments. Those with higher non-Social
Security income will see larger reductions in their checks. Individuals with more than $110,000 in non-Social Security income
will receive no Social Security payments. Married couples who file taxes jointly would be subject to higher thresholds, with
benefits beginning to phase out at a joint non-Social Security income of $110,000 and ending when income reaches $165,000.
Married couples can decide whether they want to qualify for benefits as individuals or jointly as a couple. The income thresholds
will be indexed for inflation. Income-adjusting benefits is not new. It occurs in today's Social Security system. But it is
largely hidden today and hits lower-income seniors, not just the affluent. Seniors with as little as $15,000 in non-Social
Security income, or even less in some cases, must pay tax on part of their benefits. Seniors with more income than that pay
steadily higher rates of tax on more of their Social Security benefits. The Heritage approach, when fully phased in, would
income-adjust benefits transparently and not tax the benefits a senior receives. It also would start income-adjusting at a
much higher income. Today, about half of seniors have their checks eroded by taxation. Under the Heritage plan, only about
9 percent of seniors would see their checks reduced and only just over 3.5 percent of seniors would receive no check. Real
insurance also protects seniors from poverty if their financial situation changes. Retirees who suffer a sudden and permanent
drop in non-Social Security income would find their benefits rapidly restored
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