The media in the U.S. is reporting that possible legislation from the House of Representatives could potentially cut Social Security benefits, but, that may not be the full story.The legislation that the House is looking to pass is bill H.R.5779 – Fiscal Commission Act of 2023.The Fiscal Commission Act of 2023 is calling for the creation of a 4 person commission that will design a pathway to a balanced budget “at the earliest reasonable date.”The requirements of this commission will be to “stabilize the debt-to-GDP ratio at or below 100% by the end of the 10-year period”.As of the 3rd Quarter of 2023, according to the St. Louis Federal Reserve that U.S. debt-to-GDP is at 120.13%. Meaning that the U.S. is spending well more than what it is taking in.Is the Fiscal Commission going to be all Republicans?The construction of the commission, according to the bill, will consist of “3 individuals from among the members of the Senate, and 1 outside expert”.The Senate Majority Leader, Charles (Chuck) Schumer, will have the responsibility of selecting all members of the commission.Yes, this is a Republican bill, but the power and control this bill will create will reside within the confines of the Senate Majority Leader and only that person, which until the next election is going to be a Democrat.Will this commission begin cutting Social Security benefits?There is nothing specific within the Act to Social Security nor is there any mention of cuts, cutting or even the word cut throughout the entire bill.Again, the bill from the House is simply requesting that the Senate Majority Leader hand select 4 individuals to devise a plan on how to bring down the country’s debt.Are Social Security benefits going to be cut?According to the Social Security Board of Trustees (SSBT), the Social Security program has enough funding to continue benefits as they are today through at least 2034.However, the Trustee are also reporting that the program’s operating expenses will increase by 5.42% annually while the payroll tax revenue to fund it will only grow by 3.80% over the next 9 years.Coupling this issue is the demographics within the United States as the Trustees are also stating that the country’s fertility rate will only be 1.99% going forward.This means that the current Social Security program is in the death spiral of having more and more people aging into the program while less and less people are taking their place to fund the benefits.Eventually, when it comes to the Social Security benefits, something has to give as it appears that there just won’t be enough revenue from taxes to continue to paying out the same amounts when it comes to benefits.But, again, there is nothing in this bill that even suggests that Congress will be cutting Social Security benefits.irmaa may be able save the Social Security program.By law Social Security benefits automatically pay Medicare premiums on a monthly basis.Medicare also has a tax on income through Medicare’s Income Related Monthly Adjustment Amount (IRMAA).IRMAA is simply a surcharge that is added to a retiree’s Part B and or Part D premium if they are earning too much income.Currently, you have to qualify for IRMAA by generating $103, 000 in income a year if you are an individual and $206, 000 for couples.The more income you generate after these initial qualifying points the higher the chances that your Medicare premiums increase even higher.Saving the Social Security program or at least lowering the obligations of the program can literally just come down to changing the IRMAA qualifications.
Day: July 5, 2024
Proposed Cuts to Social
You may have heard by now that there are proposed cuts to Social Security and are not sure if this true or not, well, unfortunately, it is actually true.Social Security is in trouble.Before diving into the who’s and what’s of these proposed cuts to Social Security it must be stated that something needs to be done really soon as the program is in big trouble on paper.Since 2018 the part of the Social Security program that provides retirement benefits (OASI) is and will be running at a loss each and every year.This means that the amount of benefits that the OASI is providing to retirees is greater than the amount of money that the program brings in.To provide some clarity on this huuuuge problem:In 2018, according to the Trustees of Social Security:The total cost to provide benefits within the OASI program = $853.4 million.Total revenue for that year = $831.0 million.There is an obvious shortfall of $22 million and the problem is not getting better, in fact the gap between benefits verse revenue is widening.By 2022, according to the Trustees, the problem became:The total cost to provide benefits within the OASI program =. $1, 097.5 billionTotal revenue for the year = $1, 056.7 billion.The shortfall grew to $40.8 million in just 4 years and, again, the problem is growing larger annually.The Trustees of Social Security, in its 2023 Annual Report, is reporting that:The costs to run the program are going to inflate by over 6.40%The revenue to provide benefits is only going to grow by 4.90%.At these rates by 2032 the shortfall for the OASI part of Social Security will be $428.3 billion!This is why the media is reporting that by 2032 the Social Security program may become insolvent.Is Social Security really going broke?What are the current proposed cuts to Social Security?The Social Security Administration has 9 proposals for cuts to the program which all begin by the end of 2024 and they are:1st Proposal: Reduce the annual COLA by 1 percentage point.This option will decrease Social Security benefits for retirees.2nd Proposal: Reduce the annual COLA by 0.5 percentage point.Like Option #1, this proposal will decrease Social Security benefits for retirees. The only difference is the decrease will be half of Option #1.3rd Proposal: Compute the COLA using a chained version of the consumer price index for wage and salary workers (CPI-W).The Social Security cost of living adjustment (COLA) uses the 3rd Quarter monthly averages of the Consumer Price Index for Workers (CPI-W).Social Security takes the averages of these 3 months in the 3rd Quarter and compares them to the previous year’s 3rd Quarter.If the average is greater than the previous year, then there will be a COLA for those receiving benefits.Chained Weighted CPI-W is a more accurate average where certain averages are disregarded if they are not in the norm.This proposal will decrease benefits going forward.4th Proposal: Compute the COLA using a chained version of the consumer price index for wage and salary workers (CPI-W) but start it in 2026 instead of 2024.This proposal will decrease Social Security benefits for retirees, but will start 2 years later.5th Proposal: Add 1 percentage point to the annual COLA for beneficiaries who have lived past a “specified age”.It appears that only certain retirees who are a certain age and older will receive a COLA going forward.This proposal may lower benefits across the board for retirees, but the good news, those retirees who reach the specific age may receive a COLA that would be higher than before.6th Proposal: Compute the COLA using the Consumer Price Index for the elderly (CPI-E).The CPI-E tracks the expenses specifically for Americans who are 62 years of age or older.Historically this Index is much lower than what the Social Security Administration uses and may lead to lower Social Security benefits for retirees.