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How Biden’s Proposed Social Security Changes Might Affect Your Finances in 2024


President Joe Biden has proposed measures to augment funds within the Social Security Old Age and Survivors Insurance Trust (OASI) in light of its projected depletion by 2033.

This action aims to address the projected $22.4 trillion funding shortfall outlined in the 2023 Trustees Report.

Failure by the federal government to rectify this deficit may lead to potential reductions in benefits, with retirees facing cuts of up to 23% commencing in 2033.

Certain adjustments proposed by President Biden primarily target affluent individuals and corporate executives, who possess retirement savings substantially surpassing the national average.

However, other proposed changes will impact middle- and lower-income workers, particularly those who may depend on future Social Security benefits.

Biden’s Social Security Proposal

Annually, Social Security benefits undergo evaluation and modification to accommodate inflation. Presently, the administration utilizes the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to compute this cost-of-living adjustment (COLA).

However, this metric may not accurately capture the lifestyle and expenditures of retired individuals.

While transitioning COLA computations to metrics associated with the Consumer Price Index for the Elderly may not address the issue of Social Security solvency, it has the potential to increase the financial assistance available to retired Americans with the greatest need.

Payroll Tax Proposal for $400k+ Income

President Joe Biden has proposed measures to augment funds within the Social Security Old Age and Survivors Insurance Trust (OASI) in light of its projected depletion by 2033.

At present, earned income up to $160,200 is subjected to a 12.4% payroll tax, with earnings beyond this threshold exempt from OASI taxes.

President Biden intends to impose taxes on earned income exceeding $400,000, leaving wages falling within the range of $160,200 to $400,000 untaxed.

Enhancing Primary Insurance Amount Benefits

The Primary Insurance Amount (PIA) represents the amount individuals receive in Social Security benefits, determined by the age at which they begin claiming benefits and their Average Indexed Monthly Earnings (AIME).

Enhancing the PIA for individuals aged 78 to 82 would assist those facing escalating expenses, particularly in healthcare, during later stages of life.

Enhanced Minimum Benefit for Low-Wage Lifetimes

Low-wage workers currently receive a special minimum benefit irrespective of their lifetime earnings.

As of 2023, a low-earning individual throughout their working life would be entitled to $12,402 annually in Social Security benefits, equivalent to $1,033.50 per month.

President Biden aims to raise this minimum benefit to 125% of the federal poverty level for individuals.

For instance, in 2023, a recipient of the special minimum benefit would receive $1,518.75 monthly with the proposed increase.

Any comprehensive reform of the Social Security system necessitates bipartisan support in Washington.

However, thus far, Democrats and Republicans have been unable to find common ground on strategies to both fortify Social Security reserves and enhance benefits for those in greatest need.

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