What Does a Short-Term Boost Do for Social Security? Plenty, Says a Top Analyst

Retirement expert Martha Shedden thinks Rep. John Larson, D-Conn., who introduced the Social Security 2100: A Sacred Trust bill Tuesday, has "done a great job overall." But after going through the various sections, she called Larson's office to ask why many provisions in the bill only last from early 2022 to year-end 2026.

The office explained to her that the five-year limit "is because they can't submit a bill that isn't funded," said Shedden, the president of the National Association of Registered Social Security Analysts. "And since there is only one 'strengthening item,' which includes earnings over $400,000 [being subject to payroll taxes], they only could fund the bill for the additional five years."

Currently, only earnings up to the tax cap ($142,800 in 2021 but increased each year) are taxed for Social Security. The $400,000 threshold is fixed, so over time the tax cap will rise to meet it and all earnings will be subject to the tax.

She says applying the payroll tax to earnings above $400,000 is the right thing to do, "but it should be like Medicare; all earnings should be taxed for Social Security."

Although she's disappointed that step wasn't taken, "it's better than nothing," she says.

While the bill would extend the depletion date of the trust funds only to 2038 from 2034, Shedden was told that the bill would actually cut the funds' actuarial shortfall in half.

Other Insights

Shedden also highlighted other points in the bill, including:

The move to use the Consumer Price Index for the Elderly for cost-of-living adjustments, which has been about 0.2% higher on average than the currently used CPI for Urban Wage Earners and Clerical Workers (CPI-W), is a good one, especially when considering the CPI-E is focused on big costs for older adults like housing and health care. "And health care is pretty scary."
The across-the-board benefit bump of 2%, or roughly $30 a month for the average retiree, "is wonderful," she said, and would make up for small COLAs over the past decade that typically have been "eaten up by Medicare costs."
The "widow recalculation," which would ensure a surviving spouse is to receive 75% of the combined Social Security benefits the couple received prior to one's death, "is a really positive addition."
Also, she's in favor of repealing the Government Pension Offset and Windfall Elimination Provision, meaning affected state and local government retirees would no longer be subject to reductions in their Social Security benefits.

"I work with clients to help them decide when to collect those Social Security [benefits]. It's really difficult for those who have non-covered pensions, and see that the benefit on their Social Security statement isn't what they will get because they are subject to the WEP."

Further, "a lot of times the GPO completely wipes out any survivor or spousal benefits," she said. "I understand why it was originally created, but it just doesn't make sense to me that just because you're getting this other pension that you should be penalized in your Social Security. I don't like how those are connected."

She also is on board with the provision to clarify the requirement to mail Social Security account statements to all workers age 25 and older who are not receiving benefits.

"It seems like such a small thing, but I'm really in favor of that because it starts at 25, and I'm a big proponent of adults understanding Social Security and have more awareness about it," Shedden said.

"They should sign up for a My Social Security account, if they haven't, because we need that generation to be advocates for these changes," she said. "It forces them to tune in at a younger age."

(Pictured: Martha Shedden, president, NARSSA)