A gigantic political project has been brewing in the bosom of conservative America, just in a year when Americans must decide which government they want to put in the White House in 2025. This is Project 2025, which promises to come to “save” the Social Security Administration and its various benefit programs, including retirements, Supplemental Security Income (SSI), and Social Security Disability Insurance (SSDI).
But what does this “saving” Social Security mean? Well, according to Project 2025, the proposed idea is to protect the existing fund from which benefits are paid, which has been alerted as “insufficient” for the year 2034.
Now, how do the creators of the Project 2025 think about “protecting” Social Security funds? Well, the idea is extremely unpopular and has already set off the alarms of many: the retirement age should be increased to 70 years and the amount to be paid to each beneficiary should be reduced.
The Cash-Strapped Social System — And Someone Just Proposed to Cut Its Funding?
It is an idea contrary to the one proposed by Joe Biden, when he was a candidate for reelection: according to him, he could guarantee the growth of the fund so that full benefits would continue to be paid to all eligible beneficiaries and not “prop it up” by increasing the age at which one can start enjoying retirement payments.
Social Security is facing a significant financial challenge. Costs have increased while the tax rate has remained constant, creating a shortfall between revenues and profits.
In the short term, the government is using the assets of the trust fund to cover this gap, but it is estimated that these funds will be exhausted by the early 2030s. If Congress doesn’t intervene, benefits could be cut by 20%.
Social Security Benefits at Risk
To maintain the current benefits, the system needs more financial resources. However, proposals such as that of former President Trump to eliminate taxes on Social Security benefits could worsen the situation.
These taxes, introduced in 1983, generate revenue and help to make the system more progressive, as they impose higher rates on the highest incomes.
Currently, married couples with less than $32,000 of modified adjusted gross income (AGI) pay no taxes on their benefits. Above this threshold, they can pay taxes on 50% or 85% of their profits. However, these thresholds are not adjusted for inflation, which means that more and more beneficiaries must pay taxes on a larger proportion of their benefits over time.
To improve the system, it is suggested to establish a fixed inflation-adjusted threshold below which benefits are not taxed. In addition, the current taxation of Social Security benefits could be adjusted to better reflect the mixed nature of contributions: the traditional half (taxable in retirement) and the Roth half (non-taxable in retirement).
Will Social Security Benefits Increase Any Soon?
The cost of living adjustment (COLA) is an annual increase made by the Social Security Administration (SSA) so that benefits do not lose purchasing power in the face of inflation.
The TAIL adjustment is performed every year and is used by comparing the CPI-W price index of the months of July, August, and September of a year with the same period of the previous year. The current COLA increase, which came into effect in January 2024, is 3.2%, and it is expected that for next year it will not be so auspicious.
One of the most recent forecasts of The Senior Citizens League (TSCL) says that profits will grow by about 2.6% from January 1, 2025. However, this is only a temporary projection because the inflation data for August and September 2024 are missing.
Let’s wait patiently until October, when the SSA will give the final number
Although a reform to Social Security seems to be necessary and quite urgent, perhaps the ideas that have been proposed have not generated as good reception as their managers wanted. Its long-term sustainability is at risk and the benefits of millions of Americans could be affected if the relevant executive or legislative actions are not taken.