10 Social Security Implications If Biden Beats Trump

Across America, seniors rely on Social Security to help them fund a secure retirement. But the entitlement program itself is now facing financial troubles, which COVID-19 is exacerbating.

With financial fixes only getting more expensive over time, the next presidential election could determine the future of Social Security.

Here's what that could mean if Joe Biden takes the country's highest office.

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Payroll taxes serve as Social Security's primary funding source under the current system. They total 12.4% of worker pay, with employers paying half and workers paying half (those who are self-employed pay the full amount themselves).

However, President Trump wants to cut those taxes. He recently signed an executive order deferring the collection of payroll taxes from Sept. 1, 2020, to Dec. 31, 2020.

The president has indicated he'd forgive the deferred taxes if reelected and has also expressed support for a permanent payroll tax cut.

However, the Democrats have spoken out against this action, warning it could be the end of Social Security. If a President Biden takes the White House, these cuts will assuredly be off the table.

When Trump put forth his plan to cut payroll taxes, he claimed he would still protect Social Security by diverting money from the general fund of government revenue to pay for it.

This would fundamentally change Social Security from an earned benefit in which workers pay taxes in exchange for benefits to a welfare program with no direct link between revenue and payouts.

Many experts worry it could also make Social Security more vulnerable to budget cuts by ballooning the deficit unless other taxes were increased.

If Biden becomes president, this proposal will be off the table.

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Not only would Biden not eliminate payroll taxes but he'd actually raise them for certain Americans.

Right now, Social Security taxes are collected only on income up to the wage base limit. That means, while Americans who earn up to $137,700 pay taxes on all of their income, those who earn more than that don't pay into the system on any wages above that limit.

Biden's plan, however, would require those who earn $400,000 or more in income to start paying taxes on money above that threshold.

In other words, while earnings between $137,700 and $400,000 would remain free from payroll taxes, earnings above that amount would be subject to the 12.4% tax.

Social Security has a special minimum benefit for low earners. However, it hasn't kept pace with inflation, providing an income below the poverty level. And because of the way the formula works, it's had no new recipients since 2018.

Biden's plan would change the way the special minimum benefit is calculated, giving workers with a 30-year career history guaranteed benefits of at least 125% of the federal poverty level.

According to a Penn Wharton analysis, this would lead to lower earners receiving a minimum benefit between 5% and 50% higher than under the current system.

Biden's plan also aims to take care of the oldest Americans by providing a benefits increase for those who have received retirement benefits for a long time.

The raise would be worth 5% of the primary insurance amount, phased in at a rate of 1% annually for retirees between the ages of 78 and 82.

The goal would be to protect seniors whose savings have started to run out later in life.

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Currently, Social Security cost-of-living adjustments aren't keeping pace with inflation because they're calculated using the Consumer Price Index for Urban Wage Earners and Clerical workers (CPI-W), although urban workers tend to have different spending patterns than retirees.

Biden would shift the way raises are calculated to a different, experimental price index called CPI-E, which many experts believe is a better measure of how spending increases for elderly Americans.

A change to CPI-E would raise the size of the retirement benefit checks elderly Americans receive. It arguably would better protect them from rising prices on the goods and services they purchase the most.

ALSO READ: Here Is One Major Social Security Change Joe Biden Wants to Make

Under the current rules for survivors benefits, a widow or widower can continue receiving up to 100% of the amount the deceased was getting -- but can't receive both survivors benefits and their own benefit.

Sadly, for many seniors where both spouses had similar benefit amounts, this means household income is cut in half.

Biden's plan would permit surviving spouses to keep more of the couple's combined total benefit. This could result in up to a 20% higher monthly payment for affected beneficiaries.

Currently, public sector workers are subject to a reduction in Social Security benefits if they are covered by these benefits as well as another pension.

Biden would eliminate this rule, enabling workers and surviving beneficiaries to get the full amount of Social Security benefits.

There have been a lot of proposals put forth for shoring up Social Security's finances, including means-testing benefits so there's a limit on how much higher earners receive.

Biden has categorically rejected some of these ideas in his plan, indicating that he wants to preserve the nature of the program by providing benefits to all.

ALSO READ: 4 Reasons Social Security Cuts Are Inevitable

Privatizing benefits was also suggested under past Republican administrations. That would mean allowing workers to keep some of the money currently paid into the system and invest it for their own future.

However, Biden has indicated this approach is off the table as well, as he believes it would put retirement income at risk for many.

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If Joe Biden becomes president, it's a given that certain changes, such as a payroll tax cut, won't happen.

However, Biden's ability to make any modifications to the status quo -- such as expanding benefits or making more Americans pay payroll taxes -- will depend on whether there are enough votes in the House of Representatives and the U.S. Senate.

If the Democrats do not control a filibuster-proof majority in the Senate, or outright eliminate the filibuster, the most likely result is that everything will remain the same -- at least until Social Security's impending financial troubles force action.

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