Social Security benefits over the next 75 years will exceed payroll tax revenues by $4.6 trillion. To close this enormous fiscal gap, one proposal is to cut the benefits of high-income workers. Many low- income workers depend almost entirely on Social Security for their retirement income, but it is often assumed that high-wage workers can maintain their standard of living without Social Security benefits due to their private pensions and savings. Surprisingly, however, even high-wage workers depend on Social Security for a substantial portion of their retirement income and would significantly change their consumption and saving behavior in the absence of Social Security. Specifically:
- Social Security accounts for virtually all of the discretionary consumption of households with modest preretirement incomes (less than $50,000 a year for couples or $25,000 for singles).
- It is equal to about one-third of the consumption of the highest-earning households (couples with preretirement incomes of $500,000 and singles with $250,000).