According to the Social Security Administration (SSA), between 10,000 and 15,000 applications for benefits are being received every day, and this volume has been consistent for years. There is no end in sight, because the baby boomers are reaching retirement age.
Clearly, there is a lot of interest in the ongoing solvency of the Social Security program, and the person in the Oval Office is certainly concerned. President Biden has proposed some changes, and we will look at the details here.
Trust Fund Stability
The SSA has determined that full benefits can be paid through 2037 because of legislative changes that were enacted in 1983. After that, there will be a shortfall, and ongoing taxes would be enough to fund 76 percent of the benefits.
Clearly, some additional revenue has to come from somewhere, and Biden has a plan. The taxes that are levied under the Federal Insurance Contributions Act (FICA) are used to fund Social Security. There is a limit to the amount of income that can be subject to the FICA tax.
In 2021, the limit is $142,800, and the maximum Social Security benefit is $3148 a month.
Biden would like to impose a Social Security tax on individual filers that claim $400,000 or more. At first, the people that are between $142,800 and $400,000 would be in the clear. Over time, the gap between the two figures would start to close.
This increased revenue would bolster the coffers and allow for full benefits to be paid after 2037.
The tax on the highest income earners would also fuel higher benefits. At the present time, the federal poverty level is $12,880 a year, which is $1073 a month.
In 2021, the minimum Social Security benefit for someone that paid into the program for 30 years or more is $897.90. This is well below the poverty line.
Under Biden’s plan, the minimum Social Security benefit for a beneficiary that is fully vested would be 125 percent of the federal poverty level.
Widows and widowers would get a 20 percent increase, and folks that have received benefits for at least 20 years would get a five percent increase.
Eligibility Age Overview
Since we are on the subject of Social Security, we should share some information about the eligibility age, because people often have questions.
The age of eligibility for a full benefit depends on your birth year. If you were born between 1943 in 1954, the age is 66, and it rises by two months for each birth year after that.
The two month per year progression comes to an end in 1960 when it reaches 67. This is the full eligibility age for people born during that year and any year after 1960.
You do not have to wait until you reach the full eligibility age if you are willing to accept a reduced benefit. An early retirement benefit can be accepted when you are 62, and the reduction would be between 25 and 30 percent of your full benefit depending on your birth year.
It is also possible to delay your benefit. You can hold off until you are 70, and if you do this, your benefit will increase by eight percent for every year that you delay.
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