Four Social Security Reforms That Could Hit Your Wallet by 2024 as a Result of Biden Actions

Biden’s proposals primarily target high-income earners and corporate leaders with substantial retirement savings. However, some measures will also impact middle and low-income earners, particularly those depending on social security benefits.

1. Introduce Payroll Tax for Earnings Above $400,000

At present, a 12.4% payroll tax is levied on earnings up to $160,200. Income beyond this threshold is exempt from OASI taxes. Biden’s proposal seeks to impose this tax on earnings exceeding $400,000, leaving a gap where incomes between $160,200 and $400,000 remain untaxed.

2. Modify COLA Calculation Method

Social Security benefits are annually adjusted based on inflation through the Cost of Living Allowance (COLA). The current method uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for this calculation. Biden suggests a shift to the Consumer Price Index for the Elderly, which better represents retirees’ expenses. While this won’t prevent Social Security from depleting funds, it can provide more financial support to retirees.

3. Raise the Primary Insurance Amount

The Primary Insurance Amount (PIA) determines the Social Security benefits one receives based on their age and Average Indexed Monthly Earnings (AIME). Biden proposes increasing the PIA for those aged 78 to 82 to assist with their escalating expenses, such as healthcare.

4. Enhance the Special Minimum Benefit for Long-Term Low-Wage Workers

Lifetime low-wage workers are entitled to a special minimum benefit. In 2023, this amounts to $12,402 annually or $1,033.50 monthly. Biden’s plan aims to elevate this minimum benefit to 125% of the federal poverty level. For instance, in 2023, beneficiaries would receive $1,518.75 monthly with this enhancement.

Despite its intentions, MSN suggests the plan may not secure Congressional approval. A consensus between Democrats and Republicans is essential for any Social Security reform, and both parties have yet to agree on methods to both strengthen Social Security finances and enhance benefits for the most vulnerable.