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The Debate Over Social Security Means-Testing

Social Security is an essential part of how people make ends meet in retirement. But many policymakers worry about its ability to keep paying full benefits in the coming decades. Some, including Schwab (NYSE: SCHW  ) CEO Charles Schwab, have argued in the past that means-testing Social Security benefits could save the program in the long run.

In the following video, Dan Caplinger, the Fool's director of investment planning, looks at the means-testing debate over Social Security. Dan notes that means-testing is consistent with Social Security's initial intent to provide a baseline minimum income for retirees, and that those with higher incomes arguably don't need its protection. But he also points out that high-income recipients don't take a huge percentage of the program's overall benefits, discussing research [opens a PDF] from the Center for Economic & Policy Research that means-testing would have to hit middle-income recipients as well as the rich in order to make a big-enough difference. Dan concludes by talking about how income taxes on Social Security benefits are already similar to means-testing and that new means-testing proposals won't do enough to safe Social Security by themselves.

Find out how important Social Security really is
With low enough limits, means-testing could deprive millions of Social Security recipients of their benefits. To understand exactly what impact that could have on your retirement, be sure to read our brand-new free report, "Make Social Security Work Harder For You." Inside, our retirement experts run through how the program works, giving you a sense of what means-testing might take away from you. Click here to get your copy today.


Read/Post Comments (6) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 06, 2013, at 9:36 PM, vet212 wrote:

    by all means have such a test for social security. if your income from retirement exceeds what you would draw from SS you probably don't need it and you certainly don't if your income from your family trust is 6 figures or better you most definitely do not need SS I will and you ARE taking from me

  • Report this Comment On October 06, 2013, at 9:48 PM, luckyagain wrote:

    "Some, including Schwab (NYSE: SCHW ) CEO Charles Schwab, have argued in the past that means-testing Social Security benefits could save the program in the long run."

    This would kill Social Security because it would then be viewed by Republicans as a welfare program instead of universal retirement program. The Republicans detest welfare and having a means test will eliminate the fact that everyone who pays into it will get it. Besides it will cost billions of dollars to decide who will get it and who will not.

    Without Social Security almost no American could ever retire. Asking the CEO about retirement is ridiculous because Social Security has almost no affect upon his retirement.

  • Report this Comment On October 06, 2013, at 10:35 PM, penneyless2 wrote:

    so how about doing the means-testing thing on welfare in America?, I'm sure it would save tons of money.

  • Report this Comment On October 06, 2013, at 11:55 PM, marcos989 wrote:

    All government services should be means tested, Federal and State.

    For the dim witted GOP's this is not about saving money that is a valuable by-product. It is about fairness and relieving stress on the programs meant for the truly needy.

    BTW if you are obese, smoke, drink, have cable, a $300 cell phone or drive a car newer than 15 years, you need not apply for any services.

  • Report this Comment On October 07, 2013, at 7:36 AM, FDOUGADKINS wrote:

    Another "fair" distribution idea. Since when does the liberal system allow someone to sell insurance then declair the company can't afford to pay out benefits. What "fair" distribution means in this case is that those who work pay into Social Security but those that don't get the benefit. The idea may make social sense but in no way provide equal protection under democratic principle of one man one vote. When does the Working American get some of this "fair" treatment.

  • Report this Comment On October 07, 2013, at 7:19 PM, neamakri wrote:

    there are some proposals to "save" social security; they all propose to pay retirees less money. Example; raise the retirement age.

    The country of Chili privatized their social security system dozens of years ago. Since then everything in their economy has improved (a lot). All we have to do is copy their new privatized system.

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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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