Biden’s 4 Social Security Shakeups Could Impact Your Wallet in 2024
As the Social Security Old Age and Survivors Insurance Trust (OASI) faces depletion by 2033, President Joe Biden has suggested to bolster funds in the trust and help fill the $22.4 trillion funding shortage shown in the 2023 Trustees Report. If the federal government can’t fix the shortage, it could result in benefit cuts of up to 23% for retirees beginning in 2033.
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While some of Biden’s proposed changes will affect mostly high earners and company executives — those who have retirement savings plans exponentially higher than the average American — some will affect middle- and lower-income wage earners, especially those who may rely on Social Security benefits in the future.
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Implement Payroll Tax for Income Over $400,000
Currently, any earned income below $160,200 is subject to a 12.4% payroll tax. Earnings exceeding that amount are not subject to OASI taxes. Biden plans to tax earned income above $400,000, leaving wages from $160,200 up to $400,000 untaxed.
Read More: Trump-Era Tax Cuts Are Expiring – How Changes Will Impact Retirees
Change the Way COLA Increases Are Calculated
Each year, Social Security benefits are assessed and adjusted for inflation. Currently, the administration uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to calculate this cost-of-living adjustment (COLA).
But this number doesn’t necessarily reflect the lifestyle and expenses of retired people. Shifting COLA calculations to figures tied to the Consumer Price Index for the Elderly won’t solve the problem of Social Security running out of money. But it could put more money into the pockets of retired Americans who need it most.
Increase the Primary Insurance Amount
The Primary Insurance Amount (PIA) is a figure indicating how much money you’ll receive in Social Security benefits, depending on the age you begin claiming benefits and your Average Indexed Monthly Earnings (AIME). Increasing the PIA for Americans aged 78 to 82 would help those who experience rising expenses, such as healthcare, later in life.
Increase the Special Minimum Benefit for Lifetime Lower-Wage Workers
Low-wage earners receive a special minimum benefit regardless of how much they made while they worked. In 2023, a lifetime low-earning worker would receive just $12,402 in Social Security benefits annually, or $1,033.50 per month. Biden intends to increase the minimum benefit to 125% of the federal poverty level for an individual. As an example, in 2023, someone receiving the special minimum benefit would receive $1,518.75 per month with the boost.
Any Social Security overhaul plan would require bipartisan support in Washington and, so far, Democrats and Republicans haven’t been able to see eye to eye on ways to simultaneously bolster Social Security coffers and increase benefits for those who need them most.
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This article originally appeared on GOBankingRates.com: Biden’s 4 Social Security Shakeups Could Impact Your Wallet in 2024
