The Current State Of Social Security

Democrats are typically the staunchest supporters of the American social safety net, particularly when it comes to Medicare and Social Security. Thus, it came as a surprise when President Obama submitted a budget that made some concessions to congressional Republicans on Social Security.

The crux of the President’s proposal for Social Security was that its benefits would be linked to the Consumer Price Index (CPI). As it stands, Social Security pension benefits are periodically evaluated and adjusted for inflation, which makes cost-of-living cost increases manageable for pensioners. By tying benefits to the CPI, people receiving Social Security benefits would get less than they do under the current plan. For example, a person who retires at 65 and receives $20,000 annually in social security would receive $289 less monthly under President Obama’s proposed plan.

House Democrats were shocked by the proposal and were wary of accepting it. Minority Leader Nancy Pelosi arranged a meeting with the Democratic Caucus to discuss the issue. The majority of the caucus was against the proposal and concerned about the possibility of it being adopted.

If Democrats are concerned, Republicans are unimpressed. Although the proposal was brought forth by President Obama as a means of getting Republicans to sign on with it, Republican House Speaker Boehner stated that he was “encouraged that the president acknowledged that our safety net programs are unsustainable,” but commented that the offer was “nothing close to what we need in order to … balance the budget.”

However, constituents shouldn’t fear that Social Security benefits will be needlessly limited. President Obama and the Democratic members of the legislature would only be willing to yield Social Security if the Republicans were also willing to make some serious concessions, in the name of balancing the budget. But considering that, according to Speaker Boehner’s remarks, this Social Security proposal is viewed as such a minor issue by Republicans— it is unlikely that it will generate any kind of meaningful compromise across the aisle. Unfortunately, the issue of indexation is not something Republicans really care about and the President’s proposal makes both parties unhappy. This makes it unlikely that Social Security reforms of this nature will make it through Congress.

In the short term, Social Security does not seem to be in danger; however, conservatives have dabbled in limiting Social Security since the beginning of this century. There are two indexation issues that come to play in calculating Social Security benefits: the first is the one addressed by the President’s proposal and the second (the one Republicans care about) relates to calculating the initial benefits for new retirees. This is actually something Republicans attempted (but ultimately failed) to reform back in 2005. The initial plan was to divert part of patrol taxes into personal retirement accounts. When this didn’t work out, Republicans looked into reforming how initial benefits are calculated, but that also failed due to Democratic opposition as well as blowback from far right conservatives.

People can begin collecting Social Security Income (SSI) when they retire. The Social Security Administration states that there is no “best age” at which to being receiving Social Security benefits, but they do explain that retirees collect a greater monthly income when they wait longer to retire. However, for some people it can be more beneficial to retire sooner, even if it means collecting less in monthly benefits. People can retire and begin collecting benefits as early as age 62, but the “full” retirement benefits are only available to those who are aged 66 or older.

In order to be eligible for Social Security Income, a person must live in the United States and be a citizen or a national. It is possible to complete most of an application for SSI online at www.socialsecurity.gov (please note that only websites ending in .gov are official government websites) or toll-free by phone at 1-800-772-1213. When visiting the Social Security office to finish applying, a social security card, birth certificate, payroll information, and residence information are required. See SSA.gov for more information on what to bring.

About the author

Kimberly J. Howard, CFP®, CRPC®, ADPA®
Kimberly J. Howard, CFP®, CRPC®, ADPA®

Kimberly J. Howard, CFP®, CRPC®, ADPA® is the founder and owner of KJH Financial Services in Newton MA and Denver CO. She enjoys helping clients explore and achieve their life goals through effective comprehensive financial planning.

Kimberly holds a Master of Science degree in Computer Science Information Management from Boston University. She earned a Bachelor of Science degree in Mathematics and Physical Education from Stephen F. Austin University in Texas. She attended Boston University for her Certification in Financial Planning and H&R Block for Tax Preparation Certification.

Kimberly is currently an adjunct faculty member at MetroState University where she teaches General Financial Planning Principles, Income Tax, Retirement Planning and Estate Planning. She is a past adjunct faculty member at Boston University and The College for Financial Planning.

Kimberly is a member of the Financial Planning Association (FPA) and The National Association of Personal Financial Advisors (NAPFA). She was named to the Metropolitan Who's Who Among Executive and Professional Women. She is an expert Advisor for Nerdwallet, BrightScope, Morningstar, and FiGuide.

Kimberly promotes a life planning approach with a balanced work/life style. She is active in sports including cycling, golf, skiing, and hiking.

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