The Social Security 2100 Act

Sweeping Social Security reform could happen SOON! I’m not talking about some minor adjustment to an obscure clause in the regulations, I’m talking about nearly everything changing. I'm going to break down the 6 BIG Changes that’s likely to affect YOU.

Sweeping Social Security reform could happen SOON! I’m not talking about some minor adjustment to an obscure clause in the regulations, I’m talking about nearly everything changing. I’m going to break down the 6 BIG Changes that’s likely to affect YOU.

April, 2017

This bill was first introduced in April of 2017. Since the house was still controlled by the Republicans, it died a quick death. Now it’s back. This time, the Democrats are in control of the house and there is gossip that President Trump may be on board with his support.

This is one you need to watch! It already has nearly enough co-sponsors to pass it through the House.

The Senate is still controlled by Republicans, so it’s not as certain there, but at the very least, this proposal will show you what’s on the mind of the Democrats and give us a hint at how much support the Republicans are likely to give to a bill with these sorts of provisions. 

This proposal would include both tax cuts and tax increases, a change in the way cost of living adjustments are calculated, and an across-the-board benefit increase.

Noteworthy

After reading the Bill I want to share with you the 6 things I think will have the most impact on the majority of Americans. Just understand…this is not a deep dive into each of these topic areas. It’s likely to change as the process moves forward and we’ll save the deep dive for a series when and if we get a final signature-ready Bill. Also, the purpose of this post is not to share my opinion of the proposal. Although I’m certainly not scared to do so, there are a few things that need working out before I can decide if I view this bill favorably or not. What I intend to do is give you a quick summary of this proposal that is devoid of the hyperbole that I’m sure you’ll hear from each side. Let’s get started with the 6 Big Changes that’ll come from this Bill.

Sweeping Social Security reform could happen SOON! I’m not talking about some minor adjustment to an obscure clause in the regulations, I’m talking about nearly everything changing. I'm going to break down the 6 BIG Changes that’s likely to affect YOU.

Number one: A benefit increase.

There will be an across the board increase to benefits. This will be retroactively applied to everyone who is currently receiving benefits as well. The way they’ll accomplish this is by a slight change to the Social Security formula.

Currently, your historical earnings are applied to a crediting formula at age 62 to determine your benefit amount. The only change is that the top number in this formula will change from 90% to 93% credit to your benefit amount for the earnings in that range. The estimate is that benefits will increase by an average of 2%. 

Sweeping Social Security reform could happen SOON! I’m not talking about some minor adjustment to an obscure clause in the regulations, I’m talking about nearly everything changing. I'm going to break down the 6 BIG Changes that’s likely to affect YOU.

Number Two: The second big change is a switch to CPI-E.

Currently the cost of living adjustment is calculated with the CPI-W. This methodology has been criticized for not taking into account that a retirees expenses are not the same as a working person.

The BLS has kept up with an experimental inflation number for the past several years called the CPI-E. In this measurement, they use households over the age of 62. From December 1982 through December 2011, the CPI-E rose at an annual average rate of 3.1 percent, compared with increases of 2.9 percent for the CPI-W.

Sweeping Social Security reform could happen SOON! I’m not talking about some minor adjustment to an obscure clause in the regulations, I’m talking about nearly everything changing. I'm going to break down the 6 BIG Changes that’s likely to affect YOU.

When you look at a side by side comparison, it easy to see where a retiree’s expenses are different. The green bars represent the expenses of individuals over the age of 62. You’ll quickly see that housing and medical care take up a lot more of a retirees income. If those categories increase at a rate faster than inflation, the current method just doesn’t keep up. 

Sweeping Social Security reform could happen SOON! I’m not talking about some minor adjustment to an obscure clause in the regulations, I’m talking about nearly everything changing. I'm going to break down the 6 BIG Changes that’s likely to affect YOU.

Number Three: Increase the Minimum Benefit

Big change number #3 is to increase the minimum benefit. Now there’s not much said about the Social Security minimum benefit. This is the lowest amount an individual can receive who worked a certain number of years.

It’s meant to offer a base income for those who had very low paying jobs. In 2019, the minimum is $872.50 for those who worked for 30 years. The new minimum benefit will be 125% of the poverty level for those who worked for 30 years. 

Sweeping Social Security reform could happen SOON! I’m not talking about some minor adjustment to an obscure clause in the regulations, I’m talking about nearly everything changing. I'm going to break down the 6 BIG Changes that’s likely to affect YOU.

Number 4: A decrease to social security taxes.

This needs to happen! The numbers haven’t been modified since they were introduced in 1983 and 1993. This is one of the areas of the bill that is somewhat unclear to me. But I think I’ve got it.

Currently there is a grid system that your benefits move through. For the married filing jointly, there is no tax if your provisional income is less than $32,000.

For the amounts between $32k and $44k, 50% of your benefits are included as taxable income. For amounts over $44k, 85% of your benefit is taxable income.

It appears that they are going to simplify this, and let’s say if your provisional income is less than $100k, there is no taxes on your social security benefits. If it crosses over, 85% of your benefits are taxable.  

Sweeping Social Security reform could happen SOON! I’m not talking about some minor adjustment to an obscure clause in the regulations, I’m talking about nearly everything changing. I'm going to break down the 6 BIG Changes that’s likely to affect YOU.

Number 5: To increase the maximum wage base.

Currently, you only pay social security taxes on the first $132,900 of earnings. For earnings over that, you do not pay the 12.4% tax.

The new law would put a gap in how this is taxed. If an individual’s income exceed $400,000, the FICA tax would kick back in. Those “excess earnings” as this bill calls it would not be applied to your benefit calculation at the same rate as they currently are. Instead, a new bracket would be added to credit your benefit by 2% of the excess. 

Sweeping Social Security reform could happen SOON! I’m not talking about some minor adjustment to an obscure clause in the regulations, I’m talking about nearly everything changing. I'm going to break down the 6 BIG Changes that’s likely to affect YOU.

Number #6: An increase to payroll taxes.

It would happen gradually, only .05% per year, but by 2043 employees and employers would each be paying 7.4%. This means that the total FICA tax would increase from 14.3% to 17.7%. 

SO that sums up what I think are the BIG changes that could come from the Social Security 2100 Act. As it is written currently, these provisions would eliminate the much discussed insolvency of the social security trust fund in 2034. That’s a good thing! The publicity pieces around this bill say that it would extend the solvency of social security into the year 2100 (hence the name).   

This is a Bill that I will be watching VERY carefully. When something big happens, I plan to let my subscribers know about it quickly!

Take Action!

I want to thank you for taking the time to get informed. So many people just float into retirement hoping everything will work out. Sometimes it does, but sometimes a lack of planning can ruin what should be your best years. This is your retirement! Please continue to stay informed! 

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Thanks for reading…have a great day. 

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Sal Rojas

I understand small business which is the backbone of our nation will suffer. I will benefit, but they won’t.