You'd be hard pressed to find someone who doesn't recognize the current Social Security income (SSI) infrastructure has some major flaws. The largest flaw is the program is not sustainable. The $2.8 trillion dollar pool of money reserved for Social Security retirement benefits is only large enough to cover retirees until 2035.
Despite a foreseeable end to the program started by Franklin D. Roosevelt in 1935, legislators have been hard pressed to find any reasonable solutions. That is, until now.
The House of Representatives has put forward a bill to expand Social Security. This measure was created by Representative John Larson (D – Connecticut) and supported by an unheard of 80% of the party. Will this be the saving grace Americans need?
The answer is, well… it's complicated. Social Security, as a program, is a vast resource for people that extends beyond just retirement, and it's facing a number of structural challenges. In the following article, we will look at the new legislation, and current problems within the Social Security ecosystem so consumers can plan accordingly for the future. Stay tuned!
Social Security 2100 Act
The aptly named Social Security 2100 Act is designed to protect Social Security infrastructure throughout the current century. It does this while cutting taxes for seniors and ensuring benefits for current and future SSI recipients. You're probably wondering how this is even possible. Let's dive into the specifics below:
The Social Security 2100 Act covers a lot of ground. It provides a slight increase in benefits for those currently receiving Social Security income, protects recipients from inflation, and low-income workers from living in poverty. This bill also seeks to cut taxes for the elderly, and it does all of this without taking funds from other important social programs.
The money required to protect SSI comes from an increase in payroll taxes and a total phase out of legislation that caps taxable income at $132,000. It stands to reason that high earners will likely feel the biggest impact of the legislation, designed to protect the average American and the working class economy.
However, that impact won't be felt by everyone overnight. The changes will increase payroll tax 1.2% and eventually set the cap on taxable income to $400,000 over the course of 24 years. This alleviates any pressure and potential sticker shock that could send the economy into a tailspin.
The Social Security Ecosystem
Currently, without this legislation, Social Security is headed for collapse. A major concern of seniors today is Social Security income is not a liveable wage for low-income workers who lived paycheck to paycheck without a savings to rely on. Under current circumstances, a wage increase isn't possible without further draining the existing limited fund.
Another reason for the shortage of Social Security funding is a large generation of Americans, the Baby Boomers, is hitting retirement age and cashing in all at once. In today's economy, the schedule of SSI benefits payouts is growing faster than the fund itself can handle. This isn't something we should expect to decline, as Millennials are becoming the new largest generation. Those who designed social security also didn't account for people living longer, either.
With all these societal factors influencing the availability of funds, it's no wonder we are working on a drastic SSI bailout in the form of Social Security 2100 Act. However, it's not going to glide through the House and Senate without critique from experts and politicians alike. Andrew Biggs, politics and policy contributor for National Review, suggests the bill doesn't do enough to protect low-income Americans. By design, Social Security retirement funds are only made available to people who paid into them for at least 35 years. This bill ignores financial problems of some of the lowest income people in the United States, those who don't work or haven't worked consistently over 35 years but still fall below the poverty line.
SSI has always excluded Americans that don't have the option or abilities to work consistently, however needy they may be. This draws criticism for people looking to end poverty for all Americans. That said, many from this group may qualify for Social Security and Disability Income (SSDI), a different bucket of Social Security, a fund designed to protect people with disabilities who can not work. However, that is plagued with its own issues, including a backlog of over 800,000 hearings for people waiting to get access to SSDI funds, according to Allsup, an agency that helps people get SSDI benefits. Other critics suggest there's no Social Security crisis, at all.
A Means to an End
No matter your political affiliation or lifestyle, most people agree the Social Security crisis is real and mending the infrastructure should be a focus of legislators. It remains to be seen whether Social Security 2100 Act will be the end all be all solution that fixes the current ecosystem of SSI, or if another bandaid will be applied. What we do know for sure, this is the first substantial piece of legislation addressing the elephant in the room, total SSI failure, and it's worth your consideration.