Will the upcoming midterm elections advance Joe Biden’s four proposed changes to social security? Despite the dire state of Social Security, President Biden is confident in his solution. Over 48 million retirees were among the 65.8 million Americans who got a Social Security check in September. To put it another way, 89% of these retirees rely heavily (or entirely) on their Social Security benefits. The program that has been credited with helping millions of elderly Americans out of poverty for the past eight decades is in jeopardy. The largest retirement scheme in the United States currently is $20 trillion in the red. The Social Security Board of Trustees has been publishing an annual report evaluating the program’s finances in great detail since 1940, when benefits for retirees were first established. This extensive (over 200 pages) assessment considers various factors, such as recent legislation, economic expansion, and various demographic shifts, to assess the program’s stability. To maintain present payout levels, including annual cost-of-living adjustments (COLAs), for the next 75 years, a shortfall in income collection must be made, as stated in the Trustees Report each year since 1985. According to the projection from 2022, there will be a $20.4 trillion funding gap between now and 2096. Although Social Security has significant problems, Vice President Joe Biden is convinced he has a fix. Joe Biden has four major proposals for reforming Social Security. Biden issued a four-point proposal outlining the improvements he believes are necessary to strengthen Social Security for decades while campaigning during the November 2020 election. The following modifications are listed in no particular order: Increased taxes on high-income earners This year, the payroll tax rate of 12.4% applies to all earnings and salaries earned by an individual or a business between $0.01 and $147,000. Earnings over the taxable earnings ceiling (which will be $147,000 in 2022) are not subject to payroll tax. Biden proposes reinstating the payroll tax for earnings over $400,000 to fill this tax system’s gaping hole. Adopting the Consumer Price Index-U.S. Each year since its inception in 1972, inflation has been tracked using the Consumer Price Index for Urban Wage Earners and Clerical Workers. Seniors’ purchasing power has dropped by 40% since the turn of the century because of this awful attempt to account for inflation. Biden proposes replacing the CPI-W with the CPI-E for the Elderly. Most people receiving Social Security are retirees; thus, the CPI-E would track their spending habits. Increasing the benefits for beneficiaries with an expected long lifespan Growing expenses in old life are a major difficulty for retirees. After a person reaches their 70s or 80s, they often see an increase in medical treatment and transportation prices. From age 78, Vice President Biden proposed an annual 1% increase in the primary insurance amount (PIA) until age 82. Thus, a Social Security recipient aged 82 would receive an additional 5% toward their PIA, which could partially (or entirely) compensate for rising costs. Increasing the very minimum guarantee of benefits This year, the maximum Social Security payment is $951 per month for a worker with low lifetime earnings and 30 years of coverage. That’s $181 per month below the official poverty line for an individual taxpayer in the United States. A key part of Biden’s proposed solution is raising the special minimum benefit to a level equal to 125% of the federal poverty line. More than 16 million seniors (those 65 and up) rely on Social Security to lift themselves and their families out of poverty yearly. Will Biden have the momentum to pass Social Security reforms after the November elections? Ideas may sound nice in theory, but millions of Social Security beneficiaries are still determining whether Joe Biden’s proposal will gain traction on Capitol Hill. Some citizens of the United States may be anticipating the next midterm elections as a possible catalyst for this change. However, there are two major reasons why the midterm elections will almost certainly fail to offer a way for Joe Biden’s Social Security proposal to become law. The Democratic Party and the Republican Party couldn’t be more ideologically farther apart on Social Security reform. Without getting too technical, Democrats prefer to lower long-term expenditures by progressively extending the full retirement age, while Republicans advocate boosting taxes on high earners to do the same. While both proposals strengthen Social Security, they do so in quite different time frames.
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30 + years as a Financial Planner. Securities (Series 1,7, and 65) and Insurance Licensed. Retirement Planning including the actual planning of where your income will come from as well as a discussion of products to get you there. The market has been volatile since Covid broke out and many people are not comfortable with this. If you are retired we will look at your total income and tax situation. If you are still working we have some more time to plan.
