Retirement Planning

Social Security Changes Could Come As Soon As This Year

Feb 3, 2021

Amanda Chase, Horsemouth Assistant Editor

Newly elected President Joe Biden has a tall list of priorities in his first days in office, with stemming the pandemic chief among them. But experts expect one issue he promised to deal with in his campaign, Social Security reform, could also become a focal point as soon as this year. The latest office estimate from the Social Security Administration shows that just 79% of promised benefits will be payable by 2035 due to the depletion of trust funds. That estimate does not factor in the effects of the pandemic, which experts say could move that due date up even sooner.

Biden touted big changes to the program on the campaign trail. Under his plan, eligible workers would get a guaranteed minimum benefit equal to at least 125% of the federal poverty level. People who have received benefits for at least 20 years would get a 5% bump. Widows and widowers would receive about 20% more per month. Biden also proposes changing the measurement for annual cost-of-living increases to the Consumer Price Index for the elderly, or CPI-E, which could more closely track expenses retirees face. To pay for those higher benefits, Biden would apply Social Security payroll taxes to those making $400,000 and up. In 2021, workers generally pay the 6.2% Social Security tax on up to $142,800 of wages. (Earnings between $142,800 and $400,000 would not be subject to those levies under the plan, though the gap would eventually close over time.)

Experts expect one Social Security issue to be on lawmakers’ agendas this year. The Covid-19 pandemic has created a so-called notch that would reduce benefits for those turning 62 and claim retirement benefits in 2022, as well as those who file for disability or survivor benefits that year. Congress is expected to act to prevent those reductions before they take effect. Because those benefit reductions were directly caused by Covid-19, it could be addressed in the next relief package.

The Social Security 2100 Act, proposed by Rep. John Larson, D-Conn., aims to boost benefits and restore the program’s solvency for the next 75 years by raising payroll taxes. Another proposal, the Social Security Expansion Act from Sen. Bernie Sanders, I-Vt., also aims to increase benefits for low earners while raising taxes for those with higher wages. On the Republican side, Sen. Mitt Romney, R-Utah, has touted the Trust Act, which would let lawmakers form bipartisan committees to address programs like Social Security that face a shortfall in funding and fast track changes to improve them.

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