What does the Heritage Foundation have to say about saving Social Security:Study released May 10, 2011 (Part 4)

“Saving the American Dream: The Heritage Plan to Fix the Debt, Cut Spending, and Restore Prosperity,” Heritage Foundation, May 10, 2011 by  Stuart Butler, Ph.D. , Alison Acosta Fraser and William Beach is one of the finest papers I have ever read. Over the next few days I will post portions of this paper, but I will start off with the section on Social Security. I am also going to give attention to the thoughts of Milton Friedman on the subject too. Here is the fourth portion:

The Details

A Predictable Benefit That Provides Economic Security. The centerpiece of the new Social Security system involves a gradual transition to a flat benefit that pays retirees who qualify for a full Social Security check. This amount is well above the income level that the Census Bureau says an American over the age of 65 needs to avoid poverty.

Thus, the new system will guarantee that no retiree falls into poverty because of insufficient income. Under today’s system, retirees can pay Social Security taxes for 35 years and still receive a benefit that is below the poverty level. Some of these seniors are forced to go on welfare. The new system corrects this serious flaw.

The flat benefit will be the equivalent of about $1,200 per month in 2010 dollars when the reform is complete. This is both higher than today’s average Social Security retirement benefit payment ($1,164 per month) and well above the 2009 poverty level for a single adult over age 65 ($857 per month). To ensure that future retirees do not slip back into poverty, the flat benefit level will be indexed for wage growth.

Slow Transition to the New Flat Benefit. The new flat benefit will be phased in slowly. Current retirees and those who are close to retirement will see only a minimal change in the basic design of their benefits. Those with a significantly longer time before retirement, who have more flexibility in planning their future, will see larger changes in their benefits. Workers born after 1985 will come under the new flat Social Security benefit system when they retire.

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