Almost 60 million Americans rely on Social Security benefits to help pay their living costs each month. So whenever lawmakers even hint at cutting this vital program, it's enough to get countless Americans up in arms. And several years ago, that's exactly what happened when President Obama suggested lowering Social Security benefits by changing the way cost-of-living adjustments (COLAs) are calculated.
While that proposal never came to pass, it left a bad taste in the mouths of staunch Social Security supporters. However, earlier this month, the president changed his tune on Social Security. During a June 1 speech at Concord Community High School in Elkhart, Indiana, President Obama actively pledged his support for Social Security, calling for an expansion of benefits for those who need them. And though his days in the White House are numbered, the fact that he just endorsed strengthening the program gives hope to the millions of Americans who count on Social Security just to get by.
A complete 180?
While some are hailing the president's recent remarks as a complete 180, let's remember that Obama has historically claimed to support Social Security. In fact, in both his 2008 and 2012 campaigns, he pledged to safeguard the program and reject plans to reduce benefits. But soon after his re-election in 2012, Obama proposed recalculating Social Security COLAs by using the chained Consumer Price Index formula to determine benefits. This new formula was designed to slow the rate of future benefit increases in order to reduce spending. If it were enacted, beneficiaries would surely lose out over time.
Opponents of Obama's plan made themselves clear. Unsurprisingly, Bernie Sanders got involved, rallying activists and amassing signatures against the chained CPI, which was quietly dropped from the president's budget proposal the following year. Still, Obama managed to sustain his reputation for being anti-Social Security, which is why his June 1 remarks caused so many heads to turn.
Strengthening and sustaining Social Security
During his speech, Obama acknowledged that many Americans don't have retirement savings, while those who do typically have far less than they should. He also recognized that given the declining number of pensions, Americans are counting on Social Security more than ever before. He went on to say that as a nation, we cannot afford to weaken Social Security, but rather we should strengthen its long-term health and increase benefits for those who need them.
But here's the kicker: Not only did Obama speak out in support of Social Security, but he even suggested paying for it by asking the wealthiest Americans to contribute more of their earnings. Right now, the Social Security income tax cap is set at $118,500, which means any earnings over that amount are exempt from Social Security taxes. In other words, a person making $118,500 a year pays the same amount in annual Social Security taxes as someone earning $10 million -- a disparity that's been highlighted repeatedly throughout Bernie Sanders' campaign.
Furthermore, Obama's recent endorsement of Hillary Clinton -- who has said repeatedly that she'll seek to increase benefits by taxing the wealthiest Americans -- further drives home his point that now is the time to solidify and expand Social Security, rather than slash benefits.
But don't celebrate just yet
While Obama's pro-Social Security speech is a step in the right direction, the program is still in need of some serious fixing. Even if Social Security can sustain its current level of benefits several decades into the future, the amount most beneficiaries receive each month isn't enough to live on. That's why it's imperative that working Americans also take matters into their own hands. For most of us, that means saving early on in our careers, investing wisely, and taking advantage of whatever employer incentives (such as matching retirement contributions) and tax incentives (such as those offered by 401(k)s and IRAs) come our way. It also means learning to live below our means and setting our priorities straight.
Social Security is indeed a lifeline for countless Americans, but it really shouldn't be. Rather, we should all be active savers in our quest to retire in comfort and dignity.