As the Social Security Old Age and Survivors Insurance Trust (OASI) faces depletion by 2033, President Joe Biden has proposed what MSN refers to as a “sweeping four-point plan” to bolster trust funds and help fill the $22.4 trillion funding gap identified in the 2023 Trustees Report.
If the federal government is unable to address the shortage, retirees’ benefits could be reduced by up to 24% commencing in 2033.
Social Security Changes
While some of Biden’s proposed changes will primarily affect high earners and company executives — those with retirement savings plans exponentially higher than the average American — others will affect middle- and low-income wage earners, particularly those who may in the future rely on social security benefits.
Any income earned below $160,200 is subject to a payroll tax of 12.4%. Exceeding this threshold exempts earnings from OASI taxes.
Biden intends to tax earned income above $400,000, leaving compensation between $160,200 and $400,000 untaxed.
Social Security benefits are adjusted for inflation each year using the Cost of Living Adjustment (COLA). COLA is currently calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
However, this figure does not inherently reflect the lifestyle and costs of retirees. Changing COLA calculations to reflect the Consumer Price Index for the Elderly will not prevent Social Security from running out of money.
But it could place more money in the purses of Americans who are retired and most in need.
The Primary Insurance Amount (PIA) is a number that indicates how much money you will receive in Social Security benefits based on your Average Indexed Monthly Earnings (AIME) and your age when you begin receiving benefits.
Increasing the PIA for Americans aged 78 to 82 would assist those with rising expenses, such as healthcare, in their later years.
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Low-Income Workers’ Minimum Benefit
Low-income workers receive a minimum benefit regardless of how much they earn while employed. In 2023, a lifetime low-earner would receive just $1,033.50 per month, or $12,402 annually, in Social Security benefits. Biden intends to enhance the minimal benefit for an individual to 125% of the federal poverty level. In 2023, a recipient of the special minimum benefit would receive $1,518.75 per month with the increase.
MSN reported that Congress is unlikely to approve the proposal. Any Social Security overhaul plan would require bipartisan support in Washington, but Democrats and Republicans have been unable to agree on ways to simultaneously increase Social Security revenues and benefits for those who need them the most.
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