Seniors are finding it harder and harder to make ends meet on Social Security, especially as inflation keeps rising. Legislators have been discussing various ideas to enhance Social Security for seniors for years.
President Biden has enormous ambitions for Social Security even though none of the legislative changes have went into effect. The four most important modifications he suggests are listed below.
1. Improve the method inflation is measured.
The cost-of-living adjustment (COLA), which is often given to seniors, is intended to help Social Security keep up with inflation. COLAs, however, have historically performed poorly in that regard. According to the Senior Citizens League, benefits have lost around 40% of their purchasing value since 2000.
This is in part because the Consumer Price Index for Clerical Workers and Urban Wage Earners serves as the basis for the yearly COLA (CPI-W). The information looks at the spending patterns of those under the age of 62, which might differ greatly from those of retirees.
President Biden and other politicians have suggested resolving this issue by calculating yearly COLAs using the Consumer Price Index for the Elderly. This measure is closer to how seniors really spend their money, which could make it simpler for benefits to keep up with inflation.
2. Increasing taxes on Americans with wealth
Social Security is struggling with both inflation and a cash flow issues. Right now, it spends more on benefits than it takes in through taxes. Benefit reductions of up to 20% may thus be necessary by 2035.
The program must get more financing if cutbacks are to be avoided. Payroll taxes would be raised by Biden for anyone making more than $400,000 annually.
Currently, Social Security taxes are levied on income up to $147,000 per year. The Biden plan wouldn’t alter that. The income range of $147,000 to $400,000 would not experience a rise in taxes. But if your annual income is beyond $400,000, you’ll have to pay Social Security taxes on it.
This plan would greatly enhance Social Security’s funding and potentially avoid future reductions in benefits. According to a 2022 University of Maryland study, 81% of Americans, representing both political parties, support it, making it one of the ideas with the highest likelihood of passing through Congress.
3. Increase benefits for retirees over 65
An increase in benefits for persons who are 80 years of age or older is another suggestion that is being considered. This will not only help older people keep their purchasing power, but it will also aid retirees whose funds are running short. This idea suggests raising benefits by around 5%, while nothing is definite at this point.
According to the University of Maryland, just 53% of Republicans and 56% of Democrats support this idea, making it one of Washington’s most controversial ones. However, if it were to become law, it may offer elderly retirees much-needed relief.
4. Increase the amount of the minimal benefit.
Finally, President Biden has suggested raising the minimum benefit amount for people who have worked at least 30 years from $951 per month to $1,341 per month. According to the University of Maryland, this proposal would result in an additional 7% financial shortfall for Social Security. But a few hundred dollars more per month may go a long way for the millions of seniors who rely on Social Security to make ends meet.
All of these proposals have not yet been approved by Congress. However, if they do get into law, they might significantly alter Social Security in the upcoming years and lower the cost of retirement.
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