What Does Price Indexing Mean for Social Security Benefits?

Alicia H. Munnell Mauricio Soto

JTF#14

Introduction

A potential component of the administration’s Social Security proposal is to shift from “wage indexing” of benefits to “price indexing.” This change sounds modest, but, in fact, would change the nature of the Social Security program. Price indexing would preserve the purchasing power of Social Security benefits, but these benefits would represent an ever-declining percentage of earnings before retirement…