A New Social Security ‘Notch’? Bad News for People Born in 1947

Center for Retirement Research at Boston College Working Paper No. 10-9

8 Pages Posted: 26 Jan 2012

Date Written: May 25, 2010

Abstract

This year, Social Security benefits received no Cost- of-Living Adjustment (COLA) for the first time since automatic adjustments were adopted in 1975. While current beneficiaries perceive themselves to be harmed, they were compensated by receiving a higher-than-normal 5.8-percent COLA payment in 2009. However, a quirk in Social Security’s benefit formula will produce lower benefits for new retirees, presenting a stronger case for help. Social Security’s formula for granting COLAs, interacting with a spike in inflation during 2008, could reduce benefits for individuals born in 1947 by around 2.6 percent relative to the average benefits received by the 1930-1946 birth cohorts, costing a typical couple over $12,000 over the course of their retirement. Policymakers should consider adjusting benefits for these individuals and implementing longer-term reforms to reduce the likelihood of future “notches.”

Keywords: Social Security, COLA

JEL Classification: H55

Suggested Citation

Biggs, Andrew G., A New Social Security ‘Notch’? Bad News for People Born in 1947 (May 25, 2010). Center for Retirement Research at Boston College Working Paper No. 10-9, Available at SSRN: https://ssrn.com/abstract=1991366 or http://dx.doi.org/10.2139/ssrn.1991366

Andrew G. Biggs (Contact Author)

American Enterprise Institute ( email )

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Washington, DC 20036
United States
202-862-5841 (Phone)

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