Social Security Four-Point Plan That Could Impact Your Wallet: Check Here

As the future of Social Security hangs in the balance, President Joe Biden has proposed a comprehensive Social Security four-point plan aimed at addressing the funding shortfall and ensuring the stability of the Social Security Old Age and Survivors Insurance Trust (OASI).

President Joe Biden has suggested a Social Security four-point plan to bolster funds in the trust and help fill the $22.4 trillion funding shortage shown in the 2023 Trustees Report. (Photo: CNBC)

Key Social Security Four-Point Plan

The current projection shows that the OASI will be depleted by 2033, potentially resulting in significant benefit cuts for retirees unless action is taken, Yahoo reported.

Here are the key Social Security four-point plan proposed by President Biden that could have an impact on your wallet:

Implement Payroll Tax Changes for High Earners

Under the current system, earned income below $160,200 is subject to a 12.4% payroll tax, while earnings above that threshold are not taxed.

As part of Social Security’s four-point plan, Biden seeks to introduce a tax on earned income over $400,000, leaving wages between $160,200 and $400,000 untaxed.

Revamp Cost of Living Allowance (COLA)

Calculations Social Security benefits are adjusted annually based on the Cost of Living Allowance (COLA), which is determined using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

In the Social Security four-point plan, Biden proposes shifting the calculation method to a figure tied to the Consumer Price Index for the Elderly. This change aims to better reflect the actual expenses and lifestyle of retired individuals.

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Increase the Primary Insurance Amount (PIA)

The Primary Insurance Amount (PIA) determines the level of Social Security benefits a person receives based on factors such as the age of claiming benefits and Average Indexed Monthly Earnings (AIME).

In the Social Security four-point plan, Biden’s plan includes increasing the PIA for Americans aged 78 to 82, acknowledging the rising expenses, particularly in healthcare, that individuals may face later in life.

Boost the Special Minimum Benefit for Low-Wage

Workers Low-wage earners currently receive a special minimum benefit, irrespective of their earnings during their working years. However, the existing minimum benefit falls short of meeting the needs of these individuals.

In the Social Security four-point plan, Biden aims to increase the minimum benefit to 125% of the federal poverty level for an individual, providing more substantial support to those who have earned lower wages throughout their lifetime.

Despite the proposed changes, the likelihood of the Social Security four-point plan passing through Congress remains uncertain. Achieving a Social Security overhaul would require bipartisan support, which has proven challenging thus far.

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