It is becoming increasingly difficult for seniors to live on Social Security, especially as inflation continues to rise. Legislators have been debating various proposals for years to improve social security for retirees.
While none of these laws have been implemented yet, President Biden has big plans for Social Security. Here are four of the key changes he proposes.
1. Find a better way to measure inflation
Most years, seniors will receive a cost of living adjustment (COLA) designed to help Social Security keep up with inflation. Historically, however, COLAs have done poorly. According to the Senior Citizens League, benefits have lost about 40% of their purchasing power since 2000.
This is partly because the annual COLA is based on the Consumer Price Index for City Wages and Administrative Employees (CPI-W). That data examines the spending habits of employees under the age of 62, which can be vastly different from the spending habits of retirees.
To solve this problem, President Biden and other lawmakers have proposed using the Consumer Price Index for the Elderly (CPI-E) instead to calculate annual COLAs. This metric is more aligned with how seniors actually spend, which could make it easier for benefits to keep up with inflation.
2. Raise Taxes for Rich Americans
In addition to inflation problems, Social Security also faces a cash flow problem. It currently pays out more money in benefits than it receives in taxes. As a result, benefits could potentially be cut by up to 20% by 2035.
The only way to avoid budget cuts is to increase funding for the program. Biden has proposed raising payroll taxes for those earning more than $400,000 a year.
Currently, income up to $147,000 per year is subject to Social Security taxes. That wouldn’t change under Biden’s plan. Those making between $147,000 a year and $400,000 a year would not see a tax increase. But if you make more than $400,000 a year, you’ll have to pay Social Security taxes on that income.
This proposal would significantly increase social security funding and could make a major contribution to avoiding future austerity measures. It’s also one of the most likely plans to pass in Congress, as about 81% of Americans in both political parties support it, according to a 2022 study from the University of Maryland.
3. Increase benefits for older retirees
Another proposal in the making is an increase in benefits for the over-80s. Not only will this help older adults maintain their purchasing power, but it will also boost retirees who are running out of savings. While nothing is set in stone, this plan proposes to increase the benefits by about 5%.
This is one of Washington’s more divisive proposals, as only 53% of Republicans and 56% of Democrats support it, according to the University of Maryland. But if it did pass, it could provide much-needed relief for older retirees.
4. Increase the minimum benefit amount
Finally, President Biden has proposed raising the minimum benefit amount from $951 per month to $1,341 per month for those who have worked for at least 30 years. This plan would increase Social Security’s cash deficit by about 7%, according to the University of Maryland. However, for the millions of seniors who depend on Social Security to make ends meet, a few hundred dollars extra per month could go a long way.
None of these plans have been passed in Congress to date. But if they become law, they could bring major changes to Social Security in the coming years and make retirement more affordable.