WWith inflation soaring to a 40-year high, the topic of Social Security, particularly with regard to retirement benefits, has become a controversial topic around the world. United State.
Retirees, who depend on their retirement benefits, are struggling to buy basic necessities like food, medicine, healthcare and housing costs as the purchasing power of their benefits has fallen dramatically over the past year.
All the details from Alaska’s historically high direct payments
It is estimated that 88 percent of Americans age 65 or older receive some form of Social Security, with more than half of that number stating that these payments represent the bulk of their income.
In fact, the United States also suffers from the problem of a declining birth rate and a long life expectancy, which means that the worker-to-beneficiary ratio is currently fixed at 2.8, down from 5.1 in 1960, and the number is expected to drop to 2.3 by 2035 .
Three reforms to Social Security benefits
With this in mind, the US government is considering implementing three major reforms that could protect Social Security and help beneficiaries.
1. Replace COLA with CPI-W
The Cost of Living Adjustment (COLA) was introduced in 1971, and has been used to ensure linearity between Social Security and inflation.
The main entry when determining COLA is the Consumer Price Index for urban wage earners and clerical workers (CPI-W), a measure based on purchases made by working professionals.
However, a better way to calculate COLA is to use CPI-E, or Consumer Price Index for Older Peoplewhich was introduced under the Social Security Expansion Act.
By tracking seniors’ spending, it is estimated that retirees will still have sufficient purchasing power.
2. Apply social security payroll tax for more income
The bill proposed under the Social Security Expansion Act aims to apply Social Security payroll tax to all income over $250,000.
The law would also tax the investments and business income of America’s wealthiest individuals and families to help fund the program.
3. Increase payments to long-term beneficiaries
Suggested by Joe BidenThe initiative will increase Social Security benefits by increasing benefits by one percent each year for individuals between the ages of 78 and 82.
This will eventually result in a cumulative five percent increase for any individual who has received 20-year retirement benefits.
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