As elder law attorneys, we keep a finger on the pulse of legislative proposals that would impact government benefits for senior citizens. Now that we have a new administration and a different Senate majority, the potential for change exists.
With this in mind, we will look at some possible changes to the Social Security program.
Benefit Increases
Your Social Security benefit is based on the 35 years during which you paid taxes on the most amount of money. Under the Biden proposal, the minimum for someone that has worked for at least 30 years would be set at 125 percent of the federal poverty rate.
Individuals that have received their benefits for 20 years or more would receive a five percent increase. Widows and widowers would get a 20 percent bump in the right direction.
As it stands today, there can be annual cost-of-living adjustments that are tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers. This does not reflect the costs that seniors typically incur, so Biden would like to switch to the Consumer Price Index for the Elderly.
Where Does the Money Come From?
The money to fund these proposals has to come from somewhere. At the present time, there is a $142,800 limit on the amount of income that can be taxed for Social Security purposes.
As a result, there is a maximum Social Security benefit. In 2021, the maximum benefit for someone that is retiring at the full retirement age is $3148 a month.
Biden would like to see a Social Security payroll tax for individuals that earn $400,000 or more, and it would carry a 12.4 percent rate.
Even though the Democrats have slim majorities in Congress, changes of this magnitude will be very difficult to pass. We will monitor the situation closely and pass along updates if and when they become available, so you should come back and visit us periodically.
Social Security Eligibility
While we are on the subject, we should share an overview with regard to the Social Security eligibility age.
You can take a benefit when you are as young as 62, but it would be reduced by somewhere between 25 percent and 30 percent of your full benefit. The amount of the reduction would depend on your birth year.
For people born between 1943 and 1954, the eligibility age for a full benefit is 66. It goes up by two months per year after that until 1960 when it stops at 67 years of age. This is the eligibility age for people born during that year and any later year.
If you want to maximize your benefit, you can choose to delay your application submission even after you are old enough to receive the full benefit. Your benefit would go about by eight percent for every year that you delay, but the accrual maxes out when you are 70 years of age.
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