It's that time of year. No, I'm not referring to the change of season. Instead, I'm talking about the countdown until Social Security recipients find out how much their benefits will increase next year. The Social Security Administration (SSA) is scheduled to make the big announcement in mid-October.
Predictions vary as to the exact size of the upcoming cost-of-living adjustment (COLA), but it will almost certainly be the largest increase in over four decades. If President Joe Biden could have his way, some Americans could be in store for even greater Social Security benefits in the future. Biden wants to give an extra Social Security increase to one group of retirees.
More than just a COLA
Americans can boost the amount of their monthly Social Security checks by holding off until their full retirement age or until age 70 to start receiving benefits. However, once the checks begin to flow, the only way those Social Security benefits will grow is through the annual COLA.
President Biden wants to change this situation for some individuals. He campaigned for president on a plan to provide higher Social Security benefits for the oldest Americans. Biden would like to increase the monthly checks for retirees who have received Social Security benefits for at least 20 years.
Actually, the higher benefits would be phased in a little sooner under the president's proposal. A 1% increase in the primary insurance amount (PIA) would start in the 16th year of receiving Social Security benefits and continue through the 20th year. PIA is the benefit an individual would receive if the person began drawing retirement benefits at the normal retirement age.
Why does Biden want older retirees to get a bigger Social Security increase on top of the COLA? The concern is that these individuals are more likely to exhaust their other retirement savings and potentially fall into poverty.
Not on the radar yet
Older retirees shouldn't look for higher benefits beyond what they'll get with their COLAs anytime soon. Biden's proposal isn't even on the radar screen in Washington, D.C. at this point.
None of the key components of Biden's overall Social Security plan have been implemented. For example, the president also would like to change how Social Security COLAs are calculated by using a different inflation metric. However, nothing has happened on this front yet.
That's primarily because Biden hasn't pushed for Congress to enact major Social Security legislation so far. Some of Biden's other campaign pledges, including increasing infrastructure spending and allowing Medicare to negotiate prices for costly prescription drugs, have been higher priorities.
Most likely path to becoming a reality
Of course, the president hasn't even finished the second year of his current term in office yet. There's still plenty of time for Biden to try to implement his Social Security plans.
What are the chances that increasing the benefits for older retirees will actually happen within the next few years? The odds are probably pretty low that this change would be enacted by itself. Biden's proposal would cause Social Security to become insolvent sooner than currently projected because it increases spending.
The most likely path to the idea becoming a reality is for it to be bundled with other Social Security reforms that bolster the federal program's financial position. For example, Biden also wants to tax income above $400,000 to help fund Social Security. This proposal enjoys widespread bipartisan support among Americans. Tying a benefits increase for older retirees to a change that would help prevent future Social Security cuts would almost certainly increase the chances of passing in Congress.