- A bill reintroduced in Congress this week aims to prevent Social Security beneficiaries from living in poverty.
- Even as Democratic lawmakers want to raise benefits for the lowest earners, addressing the program's solvency issues remains a hot button issue in Washington.
- Consequently, one other change, raising Supplemental Security Income benefits, could be an easier fix to make that would directly help the poor, one expert says.
Many Americans have trouble covering their costs of living with income solely from Social Security.
Now, a bill has been reintroduced in Congress aimed at reducing the risk that older Americans, women and people of color will live in poverty despite receiving their monthly checks.
The proposal, called the Social Security Enhancement and Protection Act, was put forward by Rep. Gwen Moore, D-Wis., this week.
The measure aims to improve benefits in three ways.
More from Portfolio Perspective:
How to reduce the tax bite of the coming great wealth transfer
Many 401(k) investors don't use target-date funds the right way
Inflation concerns have many retirees worried about running out of money
First, it would update what is called the special minimum benefit — a floor for low earners — to 100% of the current poverty level. This would apply to individuals who have paid into Social Security for at least 30 years and claim benefits when they reach full retirement age (typically 66 or 67, depending on when they were born). Benefits would be adjusted so that workers with at least 10 years of work but fewer than 30 would also be eligible.
In addition, Moore calls for applying childcare credits toward future program eligibility for parents of children under age 6. Those parents would receive a credit for each year a child under that age is in the home, for a maximum of five years. That time would count toward the 30 years required for the special minimum benefit.
The bill also proposes increasing monthly checks for all beneficiaries by 5% once they have been retired for 20 years. That increase would be gradually phased in starting when beneficiaries have reached 16 years of eligibility.
Student benefits would be expanded for children of deceased and disabled workers so that they would be able to continue to collect money up to age 26 as long as they are students in college or vocational schools. Currently, benefits are only paid for those children up to age 18.
Moore's plan also calls for changes to help pay for the expanded benefits.
That includes phasing out the Social Security payroll tax cap, which currently only applies to wages up to $142,800.
At the same time, the plan also calls for gradually raising the rate at which both employers and employees pay that tax to 6.5%, from the current rate of 6.2%, over six years.
"My proposal would help us ensure that Social Security does what it was intended to do: protect all older Americans from spending their retirement living in deep poverty," Moore said in a statement.
Other Social Security proposals from Democrats have also sought to establish a minimum benefit to help keep people out of poverty.
That includes five of the Democratic presidential candidates' platforms from the most recent election: President Joe Biden, Transportation Secretary Pete Buttigieg, Sen. Amy Klobuchar of Minnesota, Sen. Bernie Sanders of Vermont and Sen. Elizabeth Warren of Massachusetts.
Those plans were more fully fleshed out than those in the previous presidential election, where Hillary Clinton's platform was limited to establishing caregiver credits, said Karen E. Smith, senior fellow at the Urban Institute, a Washington, D.C., think tank.
Rep. John Larson, D-Conn., has also put forward a bill aimed at increasing benefits.
Notably, those other proposals mostly set the minimum benefit at 125% of the federal poverty level, rather than 100%.
One issue with the proposals is how well they actually address poverty, Smith said. For example, only new beneficiaries might be able to access the higher minimum benefits. At the same time, if a 20-year bump up is put in place, it might be biased towards higher-income people because they tend to live longer, she said.
While those plans call for increasing benefits for some beneficiaries, they also aim to address the program's solvency issues, though to different degrees.
Because Social Security's trust funds have about 10 years left — at which point benefits will be reduced — "they have to deal with it," Smith said of Washington leaders.
"It's really a debate in Congress that we need to have and hasn't been happening," Smith said.
Meanwhile, steps to eliminate poverty can be done at a relatively low cost.
"No matter how you want to redistribute benefits, you can eliminate poverty and still have future cohorts end up with higher benefits than current beneficiaries," Smith said.
Admittedly, passing Social Security legislation in the near future may be out of reach.
But one other change — Supplemental Security Income benefit reform — would be easier for Congress to pass now and would inevitably help the poor whom those benefits target, Smith said.
In 2021, the maximum monthly SSI benefit is $794 per individual, or $1,191 per married couple where both individuals qualify for the program.
One Senate bill calls for raising those monthly benefits to 100% of the federal poverty level, which would result in a 31% income boost.
"Increasing SSI benefits really helps poor people," Smith said. "That would be a big improvement."