You’ve been hearing the grim reports for years now. Social Security is headed for big trouble as baby boomers retire and folks live longer. But could a bill wending through the halls of Congress be just the fix that’s needed? The Social Security 2100 Act was first introduced in 2014 and again in 2017 but never received a vote. Now the bill, which supporters say could keep Social Security in the black indefinitely, may have new life. Rob West has details.
Rob answers these questions about the bill:
- What do we know about this bill?
- It’s a House bill sponsored by Congressman John Larsen and it may actually come up for a vote in the near future.
- Its supporters say it will keep Social Security solvent into the next century.
- It would not only raise revenues for Social Security, it also increases benefits.
- There are 6 major components to the bill.
These first four raise benefits:
- 1. An increase in something called the primary insurance amount or P-I-A beginning in 2020. That results in a small increase in the benefits seniors receive from the program.
- 2. A change in the way Cost of Living Adjustments— or COLAs are made. Critics say the current method doesn’t adequately reflect necessary spending by seniors for things like housing and medical care. So the bill would bump up future cost of living increases, too.
- 3. Increase the minimum benefits paid out by the program to folks who are eligible— but just barely. The current amount is below the poverty rate— so the bill would increase benefits for those folks.
- 4. The bill would also adjust taxation of Social Security benefits. The current formulas for taxing individuals and married couples filing jointly have never been adjusted for inflation. The net result has been increasing taxes for many recipients even though their spending power may actually have been reduced by inflation.
These last two raise Social Security taxes.
- 5. The bill would also reinstitute the payroll tax on earned income above $400,000. Right now— income up to $133,000 is subject to Social Security's 12.4% payroll tax. Income above that isn’t taxed because there’s a ceiling on benefits. It was once considered unfair to keep raising taxes on wealthier individuals because their benefits would not go up proportionately.
- 6. The bill puts an end to that! It would place the current payroll tax on individuals earning more than 400-thousand dollars and gradually lower that threshold until it reaches the current limit of $133,000. At that point— everyone except the lowest income recipients will be paying it.
- Does this legislation stand any chance of passing?
Next, Rob and Steve answer these questions at 800-525-7000 or via email at Questions@MoneyWiseLive.org:
- If you're self employed and your income is low because it's offset by a lot of expense reimbursement, how can you buy a house when the bank examines this number?
- If you have eight kids and four are in college with one who's costing about $1200 per month, should you back off on subsidizing his education since he's not been able to get a job to help?
- If you have a young son who made $1,000 last year and would like to contribute to a a Roth, can he be considered a "Household Employee", does he need to file income taxes and what's the documentation necessary to contribute to a Roth at age 14?
- If you have a 401(k) from a previous employer and you have a 403(b) with your new employer, should you roll the previous account into the 403(b) or into an IRA?
- If you're 27 years old and have saved $30,000, where should you invest these funds?
- If you have a couple of million, how important is it to have a wealth manager as you retire?
- If your son is interested in investing and has discovered an app called Robinhood, is this a legitimate thing to venture into?
- If you feel the economy is "going south", where should you invest your money?
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