Why One Possible Social Security Solvency Solution Could Wind Up Upsetting Retirement Planners
Social Security is facing a looming deficit, which could result in massive benefits cuts in the coming years. That’s because the program is funded by payroll taxes and that tax base is shrinking as the baby boom generation reaches retirement age. As The Motley Fool explains, there just isn’t enough money going into the coffers to replace what will be coming out. If nothing changes, Social Security’s trust fund will be out of money by 2034.
Remove Retirement Plan Tax Breaks
One possible solution, as described by the Center for Retirement Research at Boston College, suggests that limiting the tax benefits associated with retirement plans, such as IRAs and 401(k), could add more money to Social Security’s coffers. But, taking away those tax breaks could end up hurting savers in a big way and result in a major decline in personal retirement savings.
A Better Solvency Solution
The Seniors Trust believes the best solvency solution is the Social Security Expansion Act introduced by U.S. Sen. Bernie Sanders (I-Vt.). Not only does it ensure the long-term solvency of Social Security, but it also provides seniors with bigger retirement benefits.
Under this bill, seniors would receive an extra $2,400 in benefits each year. In addition, it would recalculate the way the Social Security cost-of-living-adjustment (COLA) is calculated, using the Consumer Price Index for the Elderly (CPI-E) instead of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-E more accurately reflects the actual spending of seniors, which tends to be on expenses such as healthcare and housing.
To fund the proposed benefits boost and maintain solvency far into the future, the Social Security Expansion Act calls for applying the Social Security payroll tax on all income above $250,000. Currently, earnings above $160,200 aren’t subject to the Social Security tax.
If enacted, the Social Security Expansion Act could keep Social Security solvent for about 75 years.
Join Our Efforts
The Seniors Trust believes the Social Security Expansion Act seeks to reform Social Security the right way: by expanding and strengthening benefits proven to reduce senior poverty and improve retirement security as well as extending the solvency of this crucial program.
Please, sign our petition to Congress and join us as we strive to improve the lives of senior citizens.
