Progressive indexing would keep that rule for low-income workers.
Mr. Okrent challenged my assertion (5/9/05) that the Bush Social Security "progressive indexing" plan would impose its largest percentage reductions in retirement income on middle-income workers.
Some form of "progressive indexing", where initial benefits are indexed to a mixture of prices and wages, varying according to income, is more equitable and politically more sustainable.
Because it would have a devastating impact on low-wage earners who depend almost entirely on Social Security for retirement income.The third and best answer is progressive indexing.
In short, progressive indexing would preserve Social Security benefits for the neediest workers while allowing the benefits of other future retirees to grow at the rate of consumer prices or higher.
Thus, to fix the long-term finances of Social Security, Congress has a one-time opportunity to link personal retirement accounts with benefit reform through the introduction of progressive indexing.
Under progressive indexing, by contrast, the initial benefits of the top earners would be calculated by price indexing, while the initial benefits for the bottom third would still be calculated by wage indexing (a grace period would be put in place for workers within three years of retirement).
Accordingly, the traditional benefits of these workers would be lowered by the total amounts allocated to their accounts plus interest.This combination of progressive indexing and balanced accounts would cut the long-term deficit of Social Security by half, from a present value of $3.8 trillion to $1.9 trillion over the next 75 years.
Consider progressive indexing, which would preserve benefits for the bottom third of wage earners who rely on the program for almost all of their retirement income, but recalculate the benefits of higher-paid workers who have other sources of retirement income -- including 401 k)s and IRAs -- that are tax-subsidized by the federal government.
Now that he has embraced the Democratic idea of "progressive indexing" for benefits, it will be harder for his opponents not to engage in negotiations.The underlying advantageThe problem for the Democrats is that there is probably something to the realignment theory.
