Social Security benefits could be cut earlier than expected – Community News
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Social Security benefits could be cut earlier than expected

While Social Security benefits have recently increased at the fastest pace in 40 years, payments could soon be cut by 20%. Here’s why and what to do when you’re struggling financially. (iStock)

Like the Social Security Administration (SSA) almost out of money, the expected depletion date was pushed back to 2034, just 13 years later. The exhaustion date will occur when Social Security is forced to cut benefits by 20% due to a lack of funds.

The date was pushed back due to a drop in tax revenues due to coronavirus-induced unemployment and labor shortages. With fewer people paying income taxes in 2020, funding for the Social Security system declined as it continued to pay benefits.

As Americans continue to pay to Social Security through their income taxes, the SSA is not expected to run out of money, but will instead have to cut benefits by at least 20% to continue working as more older Americans reach retirement age. to achieve.

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Congressional inaction can lead to huge payment cuts

Congress is trying to avoid a benefit cut by introducing his new account, Social Security 2100: A Sacred Trust. The bill, introduced in the House of Representatives by Rep. John Larson (D-Conn.), would first move the date by which the SSA must cut benefits to 2038, giving more time to find a permanent solution for the administration.

It would also provide all beneficiaries with an average raise of about 2% and increase payroll taxes subject to Social Security taxes, raising the maximum taxable threshold to $400,000 from the current $142,800.

The bill has 194 Democratic co-sponsors and would combine current Social Security trust funds, including Old-Age and Survivors (OASI) and disability insurance (DI) trust funds, into a single fund to ensure that all benefits are paid.

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Inflation drives Social Security payments — until they don’t

Social security pay slips are set to increase by 2022 at the highest rate in nearly 40 years, according to the SSA. Next year, benefits will rise 5.9% for about 70 million Americans, the highest increase since a 7.4% increase in 1982.

This large increase is due to rising inflation, which increased by 5.4% annually in September, according to the latest report from the Bureau of Labor Statistics (BLS).

Under the new Social Security Act, the annual cost of living adjustment (COLA) formula would be adjusted to match the CPI-E formula.

“This provision will help seniors who spend a greater portion of their income on health care and other necessities,” Larson says. said. “Improved inflation protection will especially help older retirees and widows, who are more likely to be dependent on Social Security benefits as they get older.”

If Congress can’t agree on Social Security by 2034, the level of inflation won’t matter, as benefits will be cut by about 20%. Payments will be forced to be determined by the funding available to the administration, rather than inflation levels and needs.

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