This is the misconception that socialists want people to believe.
What Fred is suggesting has NOTHING to do with reducing the COLA increases during retirement.
There are TWO different “inflation” figures used for SS:
1) After a person begins collecting SS benefits, those benefits go up each year to keep pace with inflation in prices. This is COLA, and Fred’s suggestion has NOTHING to do with any changes to that formula.
2) While a person is still years away from retirement, the SSA uses a DIFFERENT formula to estimate what your benefits will be. That estimate is based on WAGE inflation, which has historically been higher than PRICE inflation. Using WAGE inflation means you are promised a higher monthly benefit. In REAL PURCHASING POWER, you will have a better retirement than CURRENT retirees. Switching to PRICE inflation means you would have IDENTICAL purchasing power compared to current retirees.
So it would be a cut in benefits compared to what has been promised, but no cut compared to what current retirees get.
Social Security benefits are based on earnings averaged over most of a worker's lifetime. Your actual earnings are first adjusted or "indexed" to account for changes in average wages since the year the earnings were received. Then we calculate your average monthly indexed earnings during the 35 years in which you earned the most. We apply a formula to these earnings and arrive at your basic benefit, or "primary insurance amount" (PIA). This is the amount you would receive at your full retirement age, for most people, age 65. However, beginning with people born in 1938 or later, that age will gradually increase until it reaches 67 for people born after 1959.
Benefit Calculation Examples for Workers Retiring in 2008
"Thompson wants to replace that with a system indexed to the growth in inflation, which typically grows at a lower rate than wages. The result is that now-promised benefits could be cut for some workers by 10 percent in the short term and possibly much more in the longer term, analysts said. Workers under age 60 at the time the plan is adopted would be affected.
The Thompson campaign provided an example under which a $40,000-per-year worker born in 1975 would receive $1,562 per month under the current system, compared with $1,424 a month under Thompson's proposal. An $80,000-per-year worker's benefit would go from $2,469 to $2,085.
For future retirees, instead of having nothing, which is what they're headed for under the current situation that's unsustainable, they would have protection," Thompson said in the Oct. 9 debate in Michigan.