Find out how the benefits of Social Security may change as Republicans propose to raise the retirement age
This week, House Republicans revealed a proposal advocating for an increase in the Social Security retirement age. Conversely, Democrats and supporters of the program are intensifying their demands to levy taxes on wealthy individuals to improve benefits.
Emerson Sprick, associate director of economic policy at the Bipartisan Policy Center, noted the firm opposition to tax hikes among the right and the steadfast commitment among the left to address it while also preserving benefits.
The impending insolvency of both Social Security and Medicare is a pressing concern, particularly with the projected increase in the number of seniors reliant on these programs.
The trust funds that provide the financial foundation for Social Security benefits are at risk of depletion within the next ten years. This could potentially lead to a reduction of benefits by around 23% for retirees. According to estimates by the Committee for a Responsible Federal Budget, this would translate to a significant $17,400 reduction in benefits for an average dual-income couple.
Additionally, Medicare’s hospital insurance trust fund, responsible for covering Medicare Part A, may stumble upon insolvency by 2031.
Simultaneously, the Congressional Budget Office has revised its projections, anticipating that the public debt will escalate to 166% of the gross domestic product by 2054, an increase of about 97% in comparison with fiscal year 2023.
Earlier this week, the Republican Study Committee unveiled a budget proposal for 2025 that features notable reforms for Social Security and Medicare.
In a separate development, President Joe Biden presented his own budget proposal recently, outlining extensive changes he aims to implement within these programs.
It’s emphasized that any modifications made to Social Security and Medicare must garner bipartisan support. Emerson Sprick commented, “Any kind of durable policy with a realistic chance of getting through Congress is going to have to include aspects from both of these budgets”.
Republicans want to raise Social Security retirement age
As outlined in the plan, the reforms will be introduced gradually and are intended to have no impact on current or imminent retirees, aiming to ensure the sustainable solvency of Social Security’s retirement trust fund in the long term.
The Republican budget proposal advocates for “modest adjustments” to the retirement age, acknowledging increased life expectancies, although specific age increments are not specified. Currently, the full retirement age for Social Security is 67 for individuals born in 1960 or later, entitling them to full benefits.
Moreover, the plan suggests a reduction in benefits at full retirement age for high-income earners, alongside limiting the “auxiliary benefits” for their spouses and dependents. However, the budget does not define the income thresholds for these adjustments.
Regarding Medicare, the Republican budget proposal aims to restructure the program so that beneficiaries receive premium support subsidies, which can be utilized for federal traditional Medicare or private Medicare Advantage plans. The subsidy amounts would be determined after evaluating various options.
Biden’s proposal
His budget explicitly states a commitment to avoiding any reductions in Social Security benefits and dismisses any notions of privatizing the program.
To address the funding gap in Social Security, Biden’s budget advocates for higher-income individuals to contribute their equitable share. As stated by the President during his recent State of the Union address, “Under my plan nobody earning less than $400,000 will pay an additional penny in federal taxes”.
Furthermore, the budget proposal seeks to enhance Social Security and Supplemental Security Income benefits for retirees and individuals with disabilities who encounter significant financial difficulties.
In addressing Medicare’s challenges, Biden’s budget proposes raising the Medicare tax rate on both earned and unearned income from 3.8% to 5% for those earning above $400,000.