2023-08-14 00:26:41
Social Security is always a sensitive election issue, for both Republicans and Democrats. With an election season of 2024 approaching, we are approaching the period in which various proposals are usually developed and put on the floor of Congress, to change the way in which the resources of this program are obtained and distributed. That’s why today Here are 6 proposals that could negatively impact the benefits of millions of Americans.
1. Increase in the full retirement age
Full retirement age (FRA) is the age at which you will receive the full benefit amount for which you qualify, based on your earnings and work history. Depending on your year of birth, your FRA could be between 66 and 67 years. Although you can claim benefits starting at age 62, you receive less money.
In February, the Republican Study Committee’s budget, presented by House leaders, proposed that the full retirement age for Social Security gradually increase to age 70. Within the proposal, Medicare was also included, which has a set age to receive the benefit from 65 years.
2. Longevity indexing
Another proposal would require the use of longevity indices to reduce benefits as the average life span increases from one generation to the next. While a higher full retirement age is an option, an alternative is to modify the benefit formula. All retirees could see fewer benefits with such changes.
3. Longest average earnings history
The Social Security Administration (SSA) looks at the 35 years of your highest earnings to determine your benefit amount. There is a proposal that suggests increase this to 38 years. Maybe it could help with the funding gap when lower income is included.
However, this would hurt retirees who receive lower payments due to low earnings in those additional years.
4. Taxation of the Salary Reduction Plan
Under IRS rules, certain salary reduction plans, such as flexible spending accounts, do not incur employment taxes. While this benefits employees, the lack of taxes contributes to the funding gap. This leads some to propose taxing all these plans.
5. Income-Based Benefit Reductions
Currently, workers who earn the most receive more benefits at retirement. The proposal would reverse this situation. Top 25-50% earners could face reduced benefits. Although this sounds good, the action could affect many middle-class retirees who could take cuts.
6. Means tests for benefits
Added to the previous proposal, there is a proposal that would seek to implement means tests based on income or wealth. Currently, your savings and other sources of income do not affect your ability to receive Social Security benefits. With the proposal, if you exceed the earnings limits, you could get reduced benefits. An injustice for those who have the good habit of saving for retirement.
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