Social Security plays an important role in most retirement plans, and the Biden administration has proposed significant changes to the program. We will take a look at them, but before we do, let’s look at the existing parameters.
The age of eligibility for Medicare is 65 for everyone, so you might think the Social Security eligibility age is just as straightforward. In fact, it’s a bit more complicated.
For people born between 1943 and 1954, the eligibility age is 66, and it goes up by two months for every birth year. To be clear, this means someone born in 1955 will become eligible two months after their 66th birthday
The two-months-per-year increase reaches 67 in 1960, and it stops there. This is the eligibility age for people born during 1960 and any later year.
You need not apply for Social Security when you reach eligibility age. If you delay, you earn delayed retirement credits that increase your benefit by eight percent for every year you hold off until 70.
If you want to go in the other direction, you can apply for benefits when you are 62, but your benefit will be reduced by 25 percent to 30 percent depending on your birth year.
The amount of your benefit is based on your 35 highest earning years. Traditionally, there has been a limit on the amount of income taxed for Social Security and Medicare purposes.
This year, the maximum taxable income is $142,800 for a single filer. Biden has proposed a Social Security payroll tax on income that exceeds $400,000. At first, people between $142,800 and $400,000 would not pay the extra tax, but the gap would shrink over time.
This proposal would increase the minimum benefit to equal 125 percent of the federal poverty rate. Individuals who have been receiving benefits for at least 20 years would get a five percent increase, and survivors would get a 20 percent boost.
The annual cost of living increases would be based on the Consumer Price Index for the Elderly. This would provide increases more in line with actual expenses that seniors incur.
Proposals are just that; most expert observers feel as though these proposed changes will not receive congressional approval, but some movement could be negotiated over time.
We will monitor the situation and post updated information if anything changes, so you should bookmark this blog and visit us from time to time.
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