Elder law attorneys pay close attention to legislative measures that can impact benefits for senior citizens. With a new administration, some potential changes to Social Security are being floated.
President Biden has stated that he would like to increase Social Security benefits and replenish the Social Security trust fund. As it stands right now, the program is fully funded so benefits can be paid through 2037, but adjustments must be made to fully fund the program beyond that date.
At the present time, the minimum Social Security benefit for someone who has paid into the program for 30 years or more is $897.90 a month.
The federal poverty level for an individual is $12,880 a year. This equates to $1073 a month, which is quite a bit higher than the minimum Social Security benefit.
Biden’s proposal would raise the minimum for someone that is fully vested to 125 percent of the federal poverty level.
He has also proposed a 5 percent benefit increase for individuals who have been receiving their benefits for at least 20 years. The plan includes a 20 percent increase for surviving spouses.
Each year, the Social Security Administration can provide cost-of-living adjustments (COLAs), and they are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers.
Seniors incur expenses that are unique to their age group so many would say that this is not the ideal index to utilize. The Biden Social Security plan would switch to the Consumer Price Index for the Elderly.
The funding for the increases and the long-term solvency of the program would come from the highest income earners. Right now, there is a maximum amount of income that can be taxed for Social Security purposes. In 2020, the maximum is $142,800.
This proposal would impose a Social Security tax on income earners that claim $400,000 or more. It would not impact those that make between $142,800 and $400,000, but the plan would gradually close that gap.
A change of this magnitude would not sit well with some lawmakers so we are not suggesting that reforms are imminent. This is a situation that will continue to unfold over the coming months and years, and we will monitor it and share updates when they become available.
Social Security Eligibility Overview
While we are on the subject, we should share some core facts about Social Security eligibility.
You earn retirement credits when you pay self-employment or payroll taxes, and you can accumulate a maximum of four credits per year. The income requirements are modest so the vast majority of people are entitled to four credits year after year.
After you have 40 credits, you will qualify for Social Security when you reach the eligibility age, and you will also qualify for Medicare. The eligibility age for Medicare is 65 for everyone, but the Social Security rules are a bit convoluted.
You qualify for a full Social Security benefit when you are 66 if you were born between 1943 and 1954. The eligibility age increases by two months each year after that so someone born in 1955 becomes eligible two months after his or her 66th birthday.
This arrangement goes on until 1960 when it tops out at 67; this is the full eligibility age for anyone born during that year or any later year.
You can delay the submission of your application and earn delayed retirement credits that increase your benefit by eight percent per year. There is no reason to delay after you reach the age of 70, though, because the accumulation of credits comes to an end at that time.
If want to go in the other direction, you can accept a reduced benefit when you are as young as 62, and the reduction will be between 25 percent and 30 percent of your full benefit. The exact amount of the reduction would be based on your birth year.
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