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Social Security at risk of insolvency by 2030
Payroll taxes and other funding sources for the government program are being impacted by the COVID-19 pandemic.
LOS ANGELES - Advocates are calling for a one-time $1,400 stimulus check for older Americans, citing possible fallout from the upcoming Social Security boost.
Millions of retirees on Social Security will get a 5.9% boost in benefits for 2022. The biggest cost-of-living adjustment in 39 years follows a burst in inflation as the economy struggles to shake off the drag of the coronavirus pandemic.
But advocacy groups say the increase to the monthly checks for recipients may not be enough — and could also do more harm than good.
In a letter, signed by Richard Delaney, chairman of the Senior Citizens League, a nonpartisan advocacy group, the group is calling on both members of the House of Representatives and Senate to work on a one-time $1,400 stimulus check to be sent at once to Social Security beneficiaries.
"We believe that a special stimulus for Social Security recipients could help defray the higher costs some would face if next year’s COLA bumps them into a higher tax bracket, causing higher tax rates on their income and surcharges to their Medicare Part B premiums," the letter reads.
The COLA, as it's commonly called, amounts to an added $92 a month for the average retired worker, according to estimates from the Social Security Administration. It's an abrupt break from a long lull in inflation that saw cost-of-living adjustments averaging just 1.65% a year over the past 10 years.
With the increase, the estimated average Social Security payment for a retired worker will be $1,657 a month next year. A typical couple’s benefits would rise by $154 to $2,753 per month.
But that's just to help make up for rising costs that recipients are already paying for food, gasoline and other goods and services.
The COLA affects household budgets for about one in five Americans. That includes Social Security recipients, disabled veterans and federal retirees, nearly 70 million people in all. For baby boomers who embarked on retirement within the past 15 years, it will be the biggest increase they've seen.
Policymakers say the adjustment is a safeguard to protect Social Security benefits against the loss of purchasing power, and not a pay bump for retirees. About half live in households where Social Security provides at least 50% of their income, and one-quarter rely on their monthly payment for all or nearly all their income.
This year’s Social Security trustees report amplified warnings about the long-range financial stability of the program. But there’s little talk about fixes in Congress, with lawmakers’ consumed by President Joe Biden’s massive domestic legislation and partisan machinations over the national debt. Social Security cannot be addressed through the budget reconciliation process Democrats are attempting to use to deliver Biden’s promises.
Social Security’s turn will come, said Rep. John Larson, D-Conn., chairman of the House Social Security subcommittee and author of legislation to tackle shortfalls that would leave the program unable to pay full benefits in less than 15 years. His bill would raise payroll taxes while also changing the COLA formula to give more weight to health care expenses and other costs that weigh more heavily on the elderly. Larson said he intends to press ahead next year.
Social Security is financed by payroll taxes collected from workers and their employers. Each pays 6.2% on wages up to a cap, which is adjusted each year for inflation. Next year the maximum amount of earnings subject to Social Security payroll taxes will increase to $147,000.
The financing scheme dates to the 1930s, the brainchild of President Franklin D. Roosevelt, who believed a payroll tax would foster among average Americans a sense of ownership that would protect the program from political interference.
The Associated Press contributed to this story.