New Congressional Bill On Social Security Doesn’t Address The Funding Shortfall

Four old people giving a thumbs up

A House bill sponsored by Democrats called Social Security 2100 : A Sacred Trust does much to help seniors, boosting benefits in a number of areas.   Introduced by Rep. John Carson, D-Conn. who serves on the House Ways and Means Social Security Subcommittee is a bit perplexing as it is adding to a looming deficit and does nothing to address how our nation will pay for it.  Some key issues in the bill:

Benefits would be set at 125% above the poverty line and tied to current wage levels;

Both new and existing beneficiaries would get a 2% increase in their benefit, on average;

The bill would repeal rules that reduce Social Security benefits for workers and their spouses, widows or widowers who also have pension income (called the Windfall Elimination Provision and Government Pension Offset); and

Annual cost-of-living adjustments would be tied to the Consumer Price Index for the Elderly, or CPI-E.

The latest estimates from the government are that by 2034, Social Security benefits will drop to 78% of what has been promised, and this new bill extends that date to 2038 to give Congress more time to come up with a long-term solution to the program’s solvency issues.  There is a provision for an increase in the wages cap where workers have to pay Social Security Tax (up from $147,000 to $400,000).  However, this will likely be offset from a provision in the bill which would only require Social Security recipients to pay taxes on earnings above $35,000 ($50,000 for couples), up significantly from $25K and $32K respectively.  This seems to me like Congress just kicking the can down the road—why not try and solve this issue now?

https://www.cnbc.com/2021/10/26/social-security-what-a-new-plan-in-congress-would-mean-for-benefits.html

Good News And Bad News About Social Security

There was good news and bad news in the release from the Social Security Administration.  Recipients of Social Security will see a 5.9% boost in their payments starting next January.  On average, this will mean a $92 boost to $1,657/month, although payments can vary widely based on your lifetime earnings.  That’s the largest increase since 1982.   The bad news : inflation, which is what is driving the cost of living increase, is rising sharply.

https://www.wsj.com/articles/social-security-cola-increase-2022-11634067648?mod=djem10point

Pandemic, Inflation Weight Heavily On Social Security Fund

Trustees for the Social Security trust fund have revised their forecasts, and although the pandemic weighed heavily on the system, it was not as bad as originally thought.  The program is forecasted to be out of funds by 2034, just one year sooner than they had forecast in their April 2020 report.  Unless Congress shores up the fund, benefits will be automatically reduced starting in 2034.  Also weighing heavily on Social Security is the fact that inflation has increased, pushing up the cost of living increase which will further deplete funds.  “There is an incredible amount of uncertainty,” one senior administration official said. “We haven’t lived through a pandemic like this in over 100 years, so we don’t know what the effects are.”

High Social Security COLA Increase Coming

The good news is that Kiplinger’s Retirement Report now predicts that the Social Security cost-of-living adjustment (COLA) for 2022 will jump by 6.3% in 2021.  The bad news is that this will only serve to weaken a Social Security fund which is already quickly running out of money.  And don’t forget the increase is based on rising prices so many of the goods and services that you will be purchasing next year are likely to cost more.

 

Explaining Spousal Social Security Benefits

Spousal Social Security benefits can be hard to decipher, so I was glad that Elaine Floyd, the director of retirement and life planning at Horsemouth, sat down with USA Today reporter Robert Powell to explain some of the innuendos.  “What we seem to be dealing with most these days are people who want spousal benefits and don’t understand the conditions under which they can receive them,” she said.  Here are some tips:

  • The higher earner must file first—this hasn’t always been the case. You can’t claim a spousal benefit until your spouse has claimed their own benefit.  Before the Bipartisan Budget Act of 2015 became law, a dependent or the lower earning spouse could claim a benefit right away and take advantage of something called the file-and suspend strategy.  That loophole is gone.  You’re not eligible for a benefit until you are age 62 or have a qualifying child under your care.
  • You can’t receive a spousal benefit unless your own benefit is less than 50% of your spouse’s benefits. There is an exception for those born before January 2, 1965.  Those individuals can claim a spousal benefit and then claim their benefit as late as age 70.
  • The spousal benefit can be as much as half of the higher earner’s “primary insurance amount,” or PIA. If a spouse files for a spousal benefit before reaching full retirement age or FRA, he or she, unless caring for a qualifying child, will receive a reduced benefit.
  • Spousal benefits are only paid until the death of the first member of the couple.

 

https://www.usatoday.com/story/money/personalfinance/retirement/2021/08/01/retirement-5-things-to-know-about-social-security-spousal-benefits/5430601001/

TRUST Act Working Its Way Through Congress Could Cut Medicare And Social Security

A very unpopular bill called The Time to Rescue United States Trusts (TRUST) Act is now working its way through Congress.  If passed, it would set up groups of a dozen lawmakers with the power to recommend cuts to Social Security and Medicare.  This would hit the most vulnerable.  Half of those covered by Medicare have incomes of less than $27K.  Social Security is the main source of income for more than 34 million older households.  Under the new law, if seven of the twelve committee members approve of changes, they would be fast tracked in both the House of Representatives and the Senate, with no adequate debate among lawmakers and no amendments permitted on the floor of the House or the Senate.  To make sure that your senators and representative know you oppose the TRUST Act, please go to  https://action.aarp.org/trustact.

Social Security CPI Forecasted To Be Up 6.1%

There is good news and bad news in a new report coming out from The Senior Citizens League, a non-partisan senior group, which raised their forecast for the Social Security from 5.3% to 6.1%.  That’s a huge increase from prior years.  However, it’s based on a basket of goods cost of living (COLA) increase, which means that the increase will likely just make up for a 6.1% hike in goods and services that you buy every day.  In addition, some things like real estate and rental prices, medical costs and long-term care are skyrocketing.

 

https://www.forbes.com/sites/davidrae/2021/07/14/how-big-will-the-social-security-cost-of-living-adjustment-be-for-2022/?utm_source=newsletter&utm_medium=email&utm_campaign=personalized&cdlcid=607e1442fe2c195e916f3bb4&sh=433b142b52fa

President Biden Fires Head Of Social Security Administration

In a rare move, a senior government official, Andrew Saul—the Commissioner of the Social Security Administration, was asked to resign by the President of the United States and refused.  As a result, President Biden, after receiving advice from White House Counsel that he could legally remove him, fired him.  Saul had a contract to serve a six-year term expiring in January of 2025 which only allowed for his termination for “neglect of duty” or malfeasance in office.”  However, the Supreme Court recently ruled requiring cause for removal of a federal employee was unconstitutional.  Perhaps preparing for a legal battle with Saul, The White House issued a scathing press release which said, “Since taking office, Commissioner Saul has undermined and politicized Social Security disability benefits, terminated the agency’s telework policy that was utilized by up to 25% of the agency’s workforce, not repaired SSA’s relationships with relevant federal employee unions including in the context of COVID-19 workplace safety planning, reduced due process protections for benefits appeals hearings, and taken other actions that run contrary to the mission of the agency and the president’s policy agenda.”  President Biden also called for the resignation of the agency’s deputy commissioner David Black, who submitted his resignation.  Kilolo Kijakazi, the Social Security Administration’s deputy commissioner for retirement and disability policy, will serve as acting commissioner.

 

https://federalnewsnetwork.com/people/2021/07/biden-fires-saul-as-ssa-commissioner/

Salinas, CA Guide To Social Security Survivor’s Benefits

 

After the death of a loved one, it can be difficult to deal with bills, insurance, and Social Security.  Of the 5.7 million people awarded Social Security benefits in 2019, 886K were survivors of deceased workers.  In total there were 3.9 million widows and widowers receiving benefits in 2019.  You should report to the Monterey County Social Security office when a spouse dies.  Their number is 1-800-772-1213.  Unfortunately, you cannot report a death or apply for survivors benefits online.  The calculation is that if your deceased spouse was taking Social Security, your benefit will be the greater of your benefit or your spouse’s benefit.  If you are not yet collecting Social Security and you’re at least 60, the best way to maximize your benefits are to collect the survivors benefit at your current age and then switch to retirement benefits starting at age 70.

https://www.usatoday.com/story/money/personalfinance/retirement/2021/01/20/social-security-covid-understanding-how-survivors-benefits-work/4221795001/

A Spouse’s Death Can Take Its Toll On Your Investment Portfolio

The Wall Street Journal recently posted a story about the fact that your financial portfolio might quickly start unraveling if you don’t prepare for the financial consequences of your spouse’s death in advance.  Not only will you see two Social Security checks go down to one, some people have pensions that don’t have survivorship benefits and those would expire immediately.  In addition, since you will have to file single, your tax rate may go up.  “When that plan is disrupted by the tragic death of a spouse, there isn’t a lot you can do besides cut expenses or go back to work,” Jennifer Murray, a financial advisor, told The Wall Street Journal.  The bottom line: discuss this issue with your financial planner.