Congress to Fix Social Security and How It Impacts Your Retirement
Congress and the Biden administration are discussing the ongoing topic of the expected depletion of the Social Security trust account in the not too distant future. The fund’s expected depletion would be in 2034 when only 78% of benefits would be payable. Some of the possible “fixes” in the bill called Social Security 2100: A Sacred Trust, includei:
- Proposes extending the date of depletion and required benefit changes to 2038 to give Congress more time to enact necessary long-term changes.
- A higher minimum benefit for low income workers. Benefits would be set at 125% of the poverty level.
- There is also a benefit increase for both new and existing beneficiaries amounting to about 2% of the average benefit.
- Annual cost of living adjustments would be tied to a new experimental index, the Consumer Price Index for the Elderly, the CPI-E. This index is intended to be based on the costs most commonly experienced by seniors.
- Repeal rules that reduce benefits for public workers who draw pensions, and their spouses, widows, and widowers.
- Elimination of a previous proposal to raise the payroll tax rate across the board for all, but would increase taxes on higher wage earners.
- Increase the thresholds above which Social Security income is taxed to $35,000 for individuals and $50,000 for couples.
- There is a laundry list of other proposed changes, but those above cover the most recipients and those paying into the system.
If you take nothing else away from this list, it should be that you have no way of knowing which way the political winds will blow or take the Social Security payments you can expect in retirement. Planning your own retirement nest egg is even more important now than at any time before.
The employed individual has options with IRA and 401(k) accounts and perhaps others. The self-employed or small business owner has more options and some that allow faster contributions and account growth with significant tax advantages.
For most people, a consultation with a tax advisor or accountant is mandatory to adequately assess the pros and cons of IRA, 401(k), SEP IRA, Roth, and other small business retirement account options. Not only can an employer take advantage of tax deductions and build retirement fund value, but they can also attract and retain good employees by offering retirement plan options.
Have you gone through the calculation process to determine how much money you will need to fund your desired retirement lifestyle? And, if you have done that, do you have a plan to grow that much money tax free or tax deferred in a retirement account?
Why would you not want to save taxes now or at retirement and grow a retirement nest egg tax free? All it takes is a plan, and tax planning involves retirement planning for small business owners. Let Tax Hive help you with your small business accounting and tax planning.
i Congress has a new plan to fix Social Security. How it would change benefits – CNBC.com