President-elect Joe Biden has made a number of proposals to strengthen social security and extend benefits to the poorest beneficiaries. Now his ideas are about to meet a divided Congress.
The Social Security Trust Fund is expected to run out around 2035 without additional funding or reduction in benefits. Biden has pledged to expand his creditworthiness by forcing high earners to pay taxes on more of their income.
Still, observers say Congress is unlikely to approve tax increases to remedy the program’s solvency until the last minute.
“There is very little chance that until Congress feels its back is against the wall it will do something like raise Social Security taxes,” says Howard Gleckman, senior researcher at Urban- Brookings Tax Policy Center. “If they can’t agree on a stimulus bill during a pandemic, it’s hard to imagine they’re going to reform Social Security 14 years before it becomes insolvent.”
Biden’s other plans for Social Security include: strengthening benefits for the most vulnerable Americans by increasing monthly payments for those who have been receiving benefits for at least 20 years; introduce a minimum benefit for workers for life to ensure that they benefit from at least 125% of the poverty line; protect widows and widowers from sharp cuts in benefits by allowing a surviving spouse to retain a higher share of the benefits of a deceased spouse; and end provisions that reduce or eliminate benefits for those who have worked in a job in which they are entitled to a pension and have not paid social security taxes.
In addition, Biden’s plan would increase overall benefits by moving the index for calculating annual adjustments in cost of living benefits to the Consumer Price Index for the Elderly, or CPI-E, from the current consumer price index for wage earners and office workers. , or CPI-W. The CPI-E generally grows faster than the CPI-W and more accurately captures the annual changes in the price of goods and services that retirees buy, such as health care-related items.
There is more appetite for these proposals than for increasing payroll taxes, Gleckman says. “The problem is, they can’t do this without generating income or reducing someone else’s benefits,” he adds.
Even if Democrats take control of the Senate by winning Georgia’s two second-round seats in January, some observers believe a payroll tax would be difficult to pass.
The message for savers, says Ed Slott, public accountant and retirement expert in Rockville Center, NY, is, “You are alone here; you won’t get much help from the government. The old notion of the three-legged retirement stool – social security, pensions and personal savings – has been crumbling for years, he says. “It’s always about earning more, saving more and spending less.”
Write U.S at [email protected]