As elder law attorneys, we help people understand government benefits for senior citizens, and Social Security is certainly one of them. President Biden has proposed a significant change that would increase benefits, and we will provide the details here.
Social Security Eligibility
When you pay payroll or self-employment taxes, you earn retirement credits. In 2021, you get one credit for every $1470 in covered earnings, and you can accumulate four credits each year. Once you have 40 credits, you will qualify for Social Security when you reach the eligibility age.
The age at which you become eligible for your full benefit depends on the year of your birth. If you were born between 1943 and 1954, it is 66 years of age, and it then goes up by two months per year.
To be clear, someone that was born in 1955 would be eligible two months after their 66th birthday, and the eligibility age would be 66 years and four months for someone born in 1956.
This arrangement tops out at 67 in 1960, and this is also the age of eligibility for everyone that was born in any later year.
You do not have to wait until you reach the age of eligibility for a full benefit. If you are willing to accept a reduced benefit, you can start to accept payouts when you are as young as 62.
The amount of the reduction would be between 25 percent and 30 percent depending on your birth year.
If you want to maximize your benefit, you can hold out and delay the submission of your application. Your benefit would go up by eight percent for every year that you delay beyond your full retirement age, but the accrual maxes out when you are 70.
When he was on the campaign trail, Joe Biden proposed some Social Security changes that would have a big impact if they were implemented. Of course, like all proposals, the “if” is a big one.
At the present time, there is a limit on the amount of income that can be taxed for Social Security purposes. This tax is formally called the Old Age, Survivors, and Disability Insurance (OASDI) tax. In 2021, the limit stands at $142,800.
Experts have stated that the Social Security reserves will run out in 2035 if things stay the same, and this would trigger a reduction in benefits. Recipients would receive about 79 percent of the benefit they would be entitled to if the program was fully funded.
Biden would impose a 12.4 percent Social Security tax on people that earn $400,000 or more. In addition to addressing the shortfall, his plan includes an increase in the minimum benefit. It would go up to 125 percent of the federal poverty rate.
Individuals that have been receiving their benefit for at least 20 years would get a five percent increase, and widows and widowers would get a 20 percent bump up.
In addition to the Social Security reforms, Biden has also proposed a reduction in the Medicare eligibility age from 65 to 60.
Time will tell if any of these changes are actually implemented, and this is something that we will monitor closely over the coming months and years. You may want to bookmark this blog so you can stay up-to-date on this subject and other evolving topics of interest.
Attend a Free Webinar!
We go the extra mile to provide educational opportunities to our neighbors through our webinars. The sessions cover all the most important estate planning and elder care topics, and they are being offered on a complimentary basis.
They couldn’t be any more convenient, and if you join us and absorb the entire presentation, you will qualify for a free one hour remote consultation. That’s a $400 value, so this is an opportunity you do not want to miss.
You can see the schedule if you head over to our webinar page, and when you identify the session that works for you, follow the simple instructions to register.