Social security was not a hot topic during the 2020 presidential race, COVID-19, rampant unemployment and electoral thieves made headlines. But for about 1 in 6 Americans receiving Social Security benefits, it is extremely important.
President Joe Biden’s platform has several proposals that can slightly increase Social Security benefits for certain recipients. But the real question for taxpayers who have not been in benefit for at least a decade is what will Biden do to ensure the program is solvable?
Recently, Social Security began paying more than it would for the Old-Age and Survivors Insurance (OASI) Trust Fund, which pays the retirement and survivor benefits enough to continue to receive benefits under the contract until 2034. But beyond that, the payroll tax would finance only 76% of the obligation.
Biden hasn̵7;t talked much about any specific plan for Social Security as he was sworn in to take office in January. But his platform says this on Social Security: “The Biden Plan will make the program a pathway to a long-term thaw, asking ultra-high-wage Americans to pay the same tax as their income. Middle-class families pay ”
But who will pay the higher taxes and will that be enough to cover social security for future generations?
Can a tax hike for high-income earners help social security?
Workers paid Social Security taxes only the first $ 142,800 of their income in 2021, although that amount is slightly increased each year.Biden pledged not to raise taxes on those earning less than $ 400,000, but said he planned. That will charge Social Security taxes on wages above $ 400,000.
The proposal creates what is known as a Social Security donut slot where income between $ 142,800 and $ 400,000 is not taxed. But donut holes shrink each year as the current maximum is $ 142,800 up. Please note that capital gains and dividend income are not subject to Social Security taxes.
Biden’s proposal would add an estimated $ 740 billion in Social Security revenues over a 10-year period.The Urban Institute estimates that, if enacted by Congress, the plan would be enough to extend the thaw by about five years.
Bottom line: Although Biden was given a desire to make the American people. “Especially high wages” pay social security taxes at the same rate as lower earners. But it is still not enough to solve the shortage problem.
What other changes does Biden offer to Social Security?
Biden was not talking about any changes to Social Security. But his campaign platform has the following proposals that can moderately increase the benefits for some recipients:
- Using the Consumer Price Index for Older Persons (CPI-E) to calculate Social Security Cost of Living (COLA) adjustments to reflect the rising costs of aging people face.
- The minimum benefit of 125% of the federal poverty level for those who work for 30 years.
- Gradually add 5% benefits for those who have received social guarantee for 20 years or more.
- Allowing the surviving spouse to maintain a greater share of the benefit.
Should you expect Social Security to be near you?
Social Security will not go away. In the event that nothing changes, Social Security can still fund 76% of the obligation from the proceeds of payroll taxes.
But nothing Biden offers to be a silver bullet. Addressing the shortage may require an increase in Social Security taxes for lower salaried workers or an increase in the full retirement age for younger people.
Even if you are expecting 100% of your contractual Social Security benefit, it is important to remember that using the monthly check alone is incredibly difficult, COLA is not based on the actual cost of living. Of most seniors, so it will only get harder.Saving as much money as you can in retirement accounts while you still work is vital if you want to be comfortable in your golden years.