Biden's Social Security and SSI plan would lift 1.4 million out of poverty, study finds
Joe Biden's Social Security and Safety Income plans would lift 1.4 million Americans out of poverty in their first year, according to new analysis, and guarantee full benefits paid for an additional five years.
The former Vice President's plan is contingent on the introduction of 6.2% Social Security tax on earnings over $ 400,000. Employees and their employers are taxed under current guidelines on incomes up to $ 137,000.
If it came into force next year, social security would generate 7% more income in 2021, 12% more in 2040 and 16% more in 2065 than under current law. This would allow Biden to advance a seven-tier plan to increase benefits for Social Security and SSI recipients.
"Social security is facing a serious financial problem and the next president will have to deal with it," said Richard John, senior retirement program fellow at the Urban Institute, a think tank where they need to act earlier by raising taxes or cutting social security . "
Here's what Biden's plans would do.
Democratic presidential candidate Joe Biden waves as he leaves The Queen theater in Wilmington, Delaware on October 19, 2020. (Photo by Drew Angerer / Getty Images)
Increase the minimum benefit
Biden plans to increase minimum Social Security benefits to 125% of federal poverty, which will come to $ 15,950 per year in 2020. Currently, 12.8% of adults over 65 have an income below the federal poverty line.
Beneficiaries still had to complete 30 years of covered employment to qualify for the full minimum, but those who worked for at least 10 years could qualify for a proportionate share. This would only cover beneficiaries who start collecting benefits after 2020.
Replace the cost of living adjustment measure
Biden's plan also includes changing the measure of inflation used to calculate the cost of living adjustments.
Instead of using the CPI-W, the consumer price index that tracks households where at least 50% of their household income comes from office or paid jobs, social security would use the CPI-E, which is based on the spending of adults aged 62 and over. This measure weights health care expenditure more heavily and usually increases faster than the CPI-W.
Democratic presidential candidate and former U.S. Vice President Joe Biden speaks during a campaign event at the United Food and Commercial Workers Union Local 951 in Grand Rapids, Michigan on October 2, 2020. (Photo by JIM WATSON / AFP via Getty Images)
"As health prices tend to rise faster than total prices in the economy, the CPI-E will rise faster," said John.
Other important changes
Other changes to Biden's proposal include the provision of earnings credits for caregivers who care for children under 12 and / or family members with disabilities. A carer worked at least 80 hours a month and was credited with an income equal to half the national average monthly wage.
Under Biden's plan, widowed beneficiaries would receive 75% of the total benefit received by the household prior to the death of their deceased spouse, as long as it is no more than the benefit received by an average-income career couple. This limit is now 100% of the benefit of the deceased spouse and replaces the benefits of the widows.
Biden's plan would give beneficiaries who have received payments for 20 years a bonus equal to 5% of the average benefit. This bonus would be introduced gradually, starting with a 1% increase for those who have accumulated benefits for 16 years.
Democratic presidential candidate Joe Biden attends a city hall-style meeting with ABC News Chief George Stephanopoulos at the National Constitution Center on October 15, 2020 in Philadelphia, Pennsylvania. (Photo by Chip Somodevilla / Getty Images)
Finally, Biden's plan would remove certain provisions that prevent retirees receiving significant state pensions, as well as their spouses and surviving dependents, from receiving full social security benefits.
Biden's plan for extra security income
Biden also made changes to Social Security Income to help the elderly, blind, and disabled people who have little or no income and are funded from general tax revenues.
Single adults would receive benefits equal to 100% of federal poverty and increase benefits for married couples. It would also remove rules on reducing benefits for those receiving benefits in kind from relatives.
Both Biden's Social Security Changes and SSI would lift 1.4 million people out of poverty in 2021 if passed immediately, and 2.65 million people out of poverty in 2065, the study said.
Future of social security
Biden's plan, while not solving long-term social security funding problems, does delay them. The analysis found that taxing income over $ 400,000 would not deplete the Social Security Trust Fund surplus until 2040, five years longer than estimated. After that, the system would raise enough money to pay out four fifths of the planned benefits.
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His plan could have kept the surplus - closing 70% of the funding gap - for longer if it hadn't taken into account these new improvements, particularly the change in the way cost of living adjustments were calculated, the study said.
"While the intent is to increase revenue in order to maintain the program, to prevent the surplus from going out prematurely and to have enough revenue to cover the expenditure, the report assumes that the expenditure of the program will increase significantly following Biden's proposal, "said Chad Parks, founder and CEO of Ubiquity Retirement + Savings. "It's a step in the right direction, but frankly the can is kicking back down the street."
Dhara is a reporter for Yahoo Money and Cashay. Follow her on Twitter at @Dsinghx.
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