Bernie Sanders (I-VT) and Democratic lawmakers believe they have a plan to fix Social Security for the long term, and in doing so, boost benefits by $2,400 per year.
Sanders and U.S. Rep. Peter DeFazio, (D-Ore.), recently introduced the Social Security Expansion Act, legislation that seeks to extend the solvency of the safety net by 75 years and increase benefits by $200 per month. While Sanders sponsored a version of the bill in the Senate with a number of Democratic co-sponsors, DeFazio introduced the same bill in the House of Representatives.
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The legislation comes on the heels of the Social Security Administration’s most recent report on the health of the Old-Age & Survivors Insurance and Disability Insurance (OASI) Trust Fund, which is now expected to run out of money by 2035. While that’s one year later than last year’s projections indicated, Social Security benefits would drop by 23% in 2035 if no action is taken to replenish the trust fund before then.
As currently written, the legislation represents a comprehensive overhaul of the Social Security system. However, given the current polarized composition of the Senate, it remains to be seen if any version of the bill could generate enough support to pass.
Here’s a look at some of what the Social Security Expansion Act would do and how it may affect your bottom line:
Raise Taxes on the Wealthy to Extend Solvency of Social Security
By raising taxes on people making over $250,000, the bill would extend the lifespan of Social Security for another 75 years. Currently, any earnings above $147,000 are exempt from Social Security payroll taxes. The bill would lift this cap and subject any income above $250,000, including capital gains, to Social Security payroll taxes.
The bill’s sponsors say 93% of U.S. households would not see their taxes increase as a result of this provision.
Increase Monthly Benefits by $200
The legislation would increase monthly benefits for all current and new beneficiaries by $200 per month. This hike would result in an extra $2,400 per year for those collecting Social Security.
According to the Social Security Administration, the average retiree was collecting $1,666 in monthly Social Security benefits in April 2022. Under Sanders’ and DeFazio’s legislation, average benefits would climb to $1,866 per month.
Recalculate Cost-of-Living Adjustments
Under the Social Security Expansion Act, annual Cost-of-Living Adjustments (COLAs) would no longer be calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Instead, the bill would adopt a Consumer Price Index for the Elderly (CPI-E), which sponsors say would more accurately measure the spending patterns of senior citizens and result in a more fair COLA.
“Older Americans, by and large, are not going out on spending sprees buying big screen TVs, laptops, or the latest high-tech gadgets,” the bill’s fact sheet states. “Rather, they spend a disproportionate amount of their income on health care and prescription drugs and that would be reflected in the formula for calculating COLAs under this legislation.”
Bottom Line
Sen. Bernie Sanders and Rep. Peter DeFazio have introduced bills in both houses of Congress that would bolster Social Security in dramatic ways. Whether the Social Security Expansion Act will be able to generate enough support to pass remains unclear, but as written, the legislation makes significant changes to the current system. By raising taxes on the wealthy, the government would boost monthly benefits by $200 across the board and extend the solvency of the safety net program by another 75 years, according to the legislation.
Tips for Planning for Social Security
- Consider working with a financial advisor who can help you plan for Social Security and decide when is the best time to claim your benefits. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Estimating how much your Social Security benefits will be is vital component of retirement planning. SmartAsset’s Social Security Calculator can help give you better picture of how much your eventual benefits could be worth .
- Claiming Social Security before you reach your full retirement age (FRA) will result in diminished benefits. However, delaying your benefits beyond FRA will increase your benefits. We ran the numbers and examined when it makes sense to claim your benefits early and when it makes sense to defer.
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