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Home / Business / This new social security law aims to put more money in the pockets of seniors – The Motley Fool

This new social security law aims to put more money in the pockets of seniors – The Motley Fool

As of February, more than 62 million people received monthly guaranteed monthly social security payments. Of these 62 million beneficiaries, over 42 million were pensioners, 62% of whom rely on their monthly check to make up at least half of their income, according to the Social Security Administration (SSA). In other words, without social security, higher US poverty rates would probably be much higher than they are now.

The problems of social security potentially pose great problems for seniors

Despite the positive role of social security in preserving millions of seniors over the poverty line, the program itself is not in the best shape. The report of the Social Security Board of Trustees, released last summer, predicted that more will be paid out to beneficiaries than will be collected in revenue by 2022. Only 1

2 years later, in 2034, about $ 3 trillion of reserves will be completely used up.

  Cube next to a piece of paper that says, will your social security be enough?

Source: Getty Images.

If there is a silver lining for seniors and today's working Americans, it is this: Social security is not going anywhere. Since most of the revenue for the program comes from payroll tax on labor income, money should go into social security to be paid out as long as people continue to work.

Unfortunately, the survival of social insurance is not just as much as its sustainability. Without these reserves to mitigate the program, blanket cuts of up to 23% may be required to maintain payouts until 2091. For the more than three out of five seniors who count on social security, that's not a rosy outlook, at least half of their income.

In addition, the purchasing power of social security benefits has been declining for some time. An analysis by The Senior Citizens League found that the purchasing power of the social security dollars has fallen by 30% since 2000. In other words, those who bought $ 100 social security benefits in 2000 only buy goods and services worth $ 70.

This is a detour that states that the inflationary capital of social insurance, the consumer price index for urban wage earners and white-collar workers, does not adequately represent the inflation that is affecting the elderly. Therefore, the annual "increases" do not match the inflation experienced by seniors in terms of medical costs and housing costs.

This social security proposal is about putting money in the pockets of the elderly

The Social Security program has not changed significantly in recent decades, and it has not stopped lawmakers from choosing to pay Time to time to introduce solutions. Last week, three Senators – Ron Wyden (D-OR), Sherrod Brown (D-OH), and Bob Casey (D-PA) – tabled a bill to "The Elder Poverty Relief Act," focusing more on putting Putting money into the pockets of older Americans and low earners receiving social security benefits or supplementary insurance income (SSI)

  An elderly woman holds a stack of dollar bills in outstretched hands.

The proposal outlines a plan to increase the monthly benefit rates of three groups by $ 85 per month (US $ 1,020 per year) with an inflationary increase of approximately 4% per year increase. This boost, officially known as Poverty Pensions, is paid to:

  • Social Security recipients who are 82 years or older and SSI recipients who are in full retirement age (between the ages of 66 and 67). [19659016] Social security funds and SSI recipients who have received benefits for at least 20 years
  • Full age pension recipients who receive low monthly benefits, which are $ 944 per month in the proposal. This number would be adjusted annually for inflation.

The senatorial trio proposes to reduce senior poverty rates by 25% in 2030, lift some 420,000 senior citizens out of poverty, and provide monthly benefits to nearly 14 million eligible seniors. Considering that older Americans over the age of 80 have a higher poverty rate than older people under the age of 80, this bill appears to be a step in preventing the problem of old-age poverty from getting worse.

The Potentially Fatal Mistake of the Elder Poverty Relief Act

On paper, the idea of ​​bailing out monthly payments to older Americans sounds great. Unfortunately, most laws have their drawbacks, and the Elder Poverty Relief Act is no different.

The problem here is simple: social insurance has a long-term (75-year-old) cash shortfall of an estimated $ 12.5 trillion. What this means is that the program needs an infusion of new revenue to make up for this $ 12.5 trillion deficit to sustain the cut by as much as 23% in 2034. What Senators Wyden, Brown and Casey are suggesting is not the addition of new revenue as much as an acceleration of social security outflow. In short, it could speed up the period when social security reserves are used up.

  A disheveled accountant with a pencil in his mouth examining the numbers on a receipt.

Image source: Getty Images

I Wyden, Brown and Casey's suggestion have no meaning. Senior American poverty is a real problem, and a higher monthly payout could help solve it. With congress time and again deadlocking when it comes to governing social security, extending benefits in any form is an idea that should be kept off guard until the estimated $ 12.5 trillion is reached The thing is, Democrats and Republicans both have a viable solution to social security – and because they do, no side will give in with the other party and compromise.

Democrats prefer to levy wages tax on the rich, who are less likely to depend on social security income if they retire anyway. This would increase the revenues needed to avoid a reduction in benefits by 2034. In the meantime, the GOP is proposing to raise the full retirement age – the age at which employees can receive 100% of their pay – to take into account longer life expectancy. This would reduce the long-term expenditures of the program.

Both approaches work, but they would work better if both parties came together to find a middle ground between the two proposals. Until congressional MPs come to terms with the fact that they need at least partial support from the other party to regulate social security, no proposals, including the Elder Poverty Relief Act, should gain much traction.

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