Cost Of Living Adjustment

The cost of living adjustment (COLA) can be modified to reduce benefits.

Early Retirement

Currently if a person choose to retire early, their PIA will be permanently reduced by about 0.556% for each month their retirement is before normal retirement. Increasing early withdrawal penalty above .556% per month is one option available to the reformers.

Late Retirement

There is a per year percent bonus of between 3% and 8%, depending on the year of birth, for retiring after the normal retirement age, but before age 70. This bonus is to encourage late retirement which helps with the Social Security cashflow problem. Reducing that bonus will reduce benefits for those that are determined to work past normal retirement, but it might also encourage more to retire sooner.

Husbands' and Wives' Benefits

In general, a spouse is entitled to the larger of the benefit that they are entitled to from their own earnings or 50% of their fully insured spouse's benefits. That percentage could be dropped to help save Social Security. That would be an obvious change that might not be politically feasible.

Widows Benefits

The general rule is that the widow(er) would get the larger of the widows' own benefit that the widow would be entitled to by herself or her spouse's benefit. There are some exceptions to this. Since there is a real problem with widows dropping below the poverty level while receiving Social Security benefits, widows benefits probably will not get axed.

Divorced Spouses Benefits

The general rule is that a divorced spouse gets the same benefits as any other spouse as long as the marriage lasted 10 years. Consider this extreme example. John Doe was first married when he was 18. Each marriage lasted 10 years, until he died at age 78. The ex spouses did not remarry. John Doe is responsible for six wives receiving retirement and later widows benefits. From the ex wives' point of view this is probably reasonable, but John Doe's past Social Security taxes have not gone very far to support his six ex wives.