The potential financial failings of Social Security are widely known. Potential insolvency of the program is predicted at anywhere from 10-20 years based on an increasing number of retirees entering the program and a continued decline of Americans working traditional jobs that pay into it. This doesn’t even take into account the immense financial stress that the pandemic has placed on government programs as a whole.
In late July, a group of Senators introduced an updated version of Sen. Mitt Romney’s 2019 Time to Rescue United States’ Trusts Act (TRUST) that would require the Treasury Department to take significant action to improve the financial health of several major government initiatives including Social Security.
Why It Matters for Social Security
The short of it is that it would prompt the Treasury to deliver a report on the financial situation of Social Security, which in turn would prompt Congress to create bipartisan “Rescue Committees” that would be tasked with creating plans to sustain the solvency of the trust funds.
It’s unclear how exactly the bill would affect funding as some believe it may actually fast-track broader cuts to the program in order to keep it going. The bill calls for potentially raising the retirement age along with other amendments.
“Social Security 2100”: The Counterproposal
A largely Democrat-led initiative called “Social Security 2100” is seen as offering more protection for low-income workers by adding in new tax collections for the top .4% of workers (those making over $400,000 annually) and gradually phasing in a new tax rate for all workers, so that collections would increase and keep the program solvent.
The bill would also combine the two trust funds that pay Social Security into one larger fund to distribute more evenly and ensure all benefits could still be paid out past the potential insolvency date. Lastly, it also takes into account the annual cost of living adjustment (COLA) to potentially more accurately reflect the increasing cost of living for most Americans.
It’s unclear which plan will make its way through Congress, but it’s clear that the alarm bells are ringing about a long-term plan to keep Social Security solvent for generations to come. At Schott Law, we work hard to stay on top of the latest developments and analyze them to offer our clients the best possible guidance. Call us today at (509) 328-5789 to learn more.