The 4 Social Security Shifts by Biden You Can’t Afford to Ignore

Responding to the looming depletion of the Social Security Old Age and Survivors Insurance Trust (OASI) by the year 2033, President Joe Biden has introduced a series of proposals aimed at strengthening the trust and addressing the substantial $22.4 trillion funding shortfall outlined in the 2023 Trustees Report.

The consequences of neglecting this fiscal challenge loom large, potentially resulting in substantial cuts of up to 23% in benefits for retirees, starting in 2033.

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Enhancing Social Security

the-4-social-security-shifts-by-biden-you-can't-afford-ignore
Responding to the looming depletion of the Social Security Old Age and Survivors Insurance Trust (OASI) by the year 2033, President Joe Biden has introduced a series of proposals aimed at strengthening the trust and addressing the substantial $22.4 trillion funding shortfall outlined in the 2023 Trustees Report.

Overhaul of Payroll Tax Structure for High Earners

President Biden’s proposed changes to the Social Security system include a significant alteration to the payroll tax structure. 

While primarily impacting high earners and corporate executives with retirement savings exceeding the national average, the proposed adjustments also extend their influence to middle- and lower-income wage earners. 

The current system subjects earnings below $160,200 to a 12.4% payroll tax, leaving amounts beyond this threshold untouched by OASI taxes. 

Biden’s plan seeks to impose a tax on earned income surpassing $400,000, creating a tax-free bracket for wages between $160,200 and $400,000.

Rethinking Cost-of-Living Adjustment (COLA) Calculations

The annual assessment and adjustment of Social Security benefits for inflation, known as the Cost-of-Living Adjustment (COLA), are currently tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). 

Recognizing the inadequacy of this metric in reflecting the lifestyle and expenses of retired individuals, President Biden proposes a shift to COLA calculations based on the Consumer Price Index for the Elderly. 

While this adjustment may not solve the broader issue of impending trust depletion, it stands to inject much-needed financial support into the hands of retired Americans facing economic challenges.

Augmenting the Primary Insurance Amount (PIA)

The Primary Insurance Amount (PIA), a critical factor determining Social Security benefits, could see an increase for Americans aged 78 to 82. 

This adjustment aims to provide additional financial assistance to individuals grappling with rising expenses, particularly in crucial areas such as healthcare, during their later years.

Elevating the Special Minimum Benefit for Low-Wage Workers

President Biden intends to address the plight of low-wage workers by proposing an increase in the Special Minimum Benefit. 

Currently set at $12,402 annually for a lifetime low-earning worker in 2023, the plan is to boost this minimum benefit to 125% of the federal poverty level for individuals. 

For instance, this adjustment would result in a monthly benefit of $1,518.75 for individuals in this category in 2023.

Despite the urgency of these proposed reforms, any substantial overhaul of the Social Security system hinges on garnering bipartisan support in Washington. 

Democrats and Republicans, thus far, remain at an impasse in finding common ground to simultaneously fortify Social Security coffers and amplify benefits for those most in need. 

The fate of these proposed changes remains uncertain as the nation grapples with the impending depletion of the OASI Trust.

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