November 3rd, 2014|
When U.S. citizens are no longer able to work, many depend on Social Security Disability benefits for income. The problem is a lack of funding is causing a threat of benefit cuts for recipients.
Estimates show that Social Security Disability benefit payments could be slashed by as much as 23 percent by 2033. Those cuts could increase another 5 percent by 2088.
These potential cuts in benefits have prompted lawmakers to begin developing solutions. One proposal discussed in Forbes magazine—called the Social Security 2100 Act—calls for three major changes to resolve the issue:
- Changes to Cost-of-Living-Adjustment (COLA) calculations– The current COLA calculation system uses the consumer price index to measure inflation on goods and services, which is in turn used to determine the annual COLA. The problem is this system measures inflation amongst the entire population, while most Social Security recipients are elderly. The act calls for a new inflation measurement method—called the Consumer Price Index for Elderly Consumers—that measures inflation in areas where the elderly spend most of their money.
- Increases in the threshold of income that is taxable for Social Security– The proposal calls for increases in the amount of income you can receive from the Social Security Administration that is considered taxable. New limits could be as much as $50,000 for a single individual or $100,000 for a couple.
- Increased Social Security Tax Rate– Currently, a taxation rate of 6.2 percent of earned income is established for Social Security. Social Security 2100 Act calls for that rate to be bumped to 7.2 percent by 2037.