THERE could be a plan in the works to save Social Security recipients from having their benefits reduced.
It’s one of the first signs of significant progress in preventing the money set aside for millions of Americans from running out.
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The Social Security Administration (SSA) released projections on June 18 that showed 100% of benefits from these funds could only be distributed in a combined capacity through 2034.
That means after that point in time, some recipients wouldn’t be able to get all of the cash they qualified for, only part of it.
June’s release confirming a 2034 deadline is also a year earlier than initially reported last year by the federal agency, and some could see as much as a 19% reduction to checks.
There have since been calls to action from those like Myechia Minter-Jordan, CEO of AARP, since the revelation of the depleted funds.
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“Congress must act to protect and strengthen the Social Security that Americans have earned and paid into throughout their working lives,” Minter-Jordan told USA Today.
“More than 69 million Americans rely on Social Security today and as America’s population ages, the stability of this vital program only becomes more important.”
A bipartisan team of Senators is now taking action, proposing a controversial plan to solve the SSA funds issue, per The Hill.
Louisiana Senator Bill Cassidy (R) and Virginia Senator Tim Kaine (D) have called for an investment of $1.5 trillion into an investment fund over the next five years.
After that, the government would leave the cash at let it grow for a 70-year period.
“It is something to save Social Security, and to save the benefits flowing to the people [who], frankly, will either already depend on them or will depend on them going forward,” Cassidy told the publication.
It’s important to note that the Social Security Administration (SSA) sends out cash to recipients from two different trust funds.
First is the Old-Age and Survivors Insurance (OASI) Trust Fund, responsible for retirement and survivors benefits.
There’s also the Disability Insurance (DI) Trust Fund, which, hence the name, provides the necessary benefits for disabled persons and their families.
The OASI fund is also in more of a dire situation than the DI fund, as OASI is projected to pay complete scheduled benefits only until 2023, per the SSA projections report from June.
HOW TO SUPPLEMENT YOUR SOCIAL SECURITY
Here’s how to supplement your Social Security:
Given the uncertainty surrounding Social Security’s long-term future, it’s essential for workers to consider ways to supplement their retirement income.
Senior Citizens League executive director, Shannon Benton recommends starting early with savings and investing in retirement accounts like 401(k)s or IRAs.
- 401(k) Plans
- A 401(k) is a retirement account offered through employers, where contributions are tax-deferred.
- Many employers also match employee contributions, typically between 2% and 4% of salary, making it a valuable tool for building retirement savings.
- Maxing out your 401(k) contributions, especially if your employer offers a match, should be a priority.
- IRAs
- An Individual Retirement Account (IRA) offers another avenue for retirement savings.
- Unlike a 401(k), an IRA isn’t tied to your employer, giving you more flexibility in your investment choices.
- Contributions to traditional IRAs are tax-deductible, and the funds grow tax-free until they are withdrawn, at which point they are taxed as income.
For DI, it’s fully funded through 2099.
NEW FUND
Cassidy and Kaine’s plan, which has yet to have a formal text-based document, would involve a new investment fund separate from the OASI and DI funds.
Annual deposits of $300 billion over the five-year period would be made by the government, totaling the $1.5 trillion mark.
The money would be invested in stocks, bonds, and other areas where, according to Cassidy, it would be held “in escrow for 70 years.”
“Any dividends being paid, for example, flow back into the investment fund,” the Senator explained.
“As that occurs, we also repeal the law requiring that benefits be cut to match income.”
TREASURY TO THE RESCUE
In the interim period where the OASI fund would be depleted, about 75 years, the idea is that the United States Treasury Department would make up the difference during that time.
The investment fund would then pay back the Treasury Department and use any remaining money to supplement Social Security distributions.
Cassidy also claimed that the plan wouldn’t add to the national debt of around $30 trillion, currently.
“And so, even though we’re borrowing that money, it does not increase our nation’s indebtedness and the investment income will exceed the interest that accumulates on the money borrowed,” he said.
The Senators’ plan is still in the works, and they’re currently gathering input from fellow legislators.
A huge u-turn was also made recently for an August 18 policy from the Social Security administration.
The SSA chief also recently fired back at claims of “mismanagement” from legislators and pointed to “record backlogs.”
