Overall the Social Security 2100 legislation has some good provisions, but many proponents are creating unrealistic expectations for “expanded” benefits, especially for current beneficiaries.
Social Security 2100 will provide a higher minimum benefit for very low income people and it will allow many to avoid paying income taxes on their benefits by increasing the threshold for taxation. it will also gradually raise payroll taxes for working Americans.
However, when it comes to increased benefits for current beneficiaries and future COLAs don’t expect too much.
Here is what the legislation says:
SEC. 101. ACROSS-THE-BOARD BENEFIT INCREASE.
(a) IN GENERAL.—Section 215(a)(1)(A)(i) of the Social Security Act (42 U.S.C. 415(a)(1)(A)(i)) is amended by striking ‘‘90 percent’’ and inserting ‘‘93 percent’’.
From Social Security 2100 Fact Sheet
Benefit bump for current and new beneficiaries – Provides an increase for all beneficiaries that is the equivalent to about 2% of the average benefit. The US faces a retirement crisis and a modest boost in benefits strengthens the one leg of the retirement system that is universal and the most reliable. [Sec. 101]
Here is what the change means:
Currently the first $926 of indexed earnings are multiplied by 90%; over $926 by 32% and over $5,583 by 15%.
Under the proposal the 90% becomes 93%, So, $ 926 X 3% = $27.78 the dollar value of the increase. NOTE: the $926 indexed earnings changes regularly.
The average Social Security benefit was $1,461 per month in January 2019. 2% of that amount is $29.22. So for average beneficiaries the increase is less than 2% and for all those folks who are not average, far less. ($2,000 monthly benefit = 1.4%).
It seems unlikely that a pay raise, taxable for many households, of $6.90 per week will do too much to strengthen one leg of the retirement stool. Unless Americans accept at least doubling of the SS payroll tax, Social Security will remain a minor contributor to an adequate retirement income for a substantial percentage of retired Americans.
When it comes to the COLA, using the CPI-E provides no guarantee of higher COLAs in the future.