Under the new Biden administration the future of Social Security and Medicare President Joe Biden has proposed reform and expansion of both that go well beyond addressing solvency.
The Social Security Problem
A solvency problem that may be years out has been looming within social security in the form of Social Security’s actuary projections. Combined, by 2034, the retirement and disability trust funds would be completely exhausted.
This is due in part largely to the economic downturn and accompanying slump in payroll tax receipts.
With current projections, the program would have sufficient income from current tax payments to meet roughly 80 percent of promised benefits. This means that there could possibley be a 20% cut in social security benefits from 2034 moving forward.
President Biden’s Plan For Social Security
President Biden’s plan includes a new tier of payroll tax contributions for high earners. Currently, workers and employers split a 12.4% tax, levied on income this year up to $142,800. Biden would add a new tax at the same rate on incomes over $400,000. That would extend solvency only until 2040.
Notably, the revenue from this new higher bracket would grow over time as more workers move past the $400,000 trip point.
President Joe Biden’s plan further explored:
⦁ could be helpful to retirees in the wake of the economic devastation wrought by the pandemic
⦁ credit caregivers in their benefits for time spent out of the workforce
⦁ would especially benefit women, who already face a substantial retirement gender gap