Every year, the United StatesSocial Security Administrationsees an increase in the COLA for its benefits. It doesn’t matter if the benefits are retirement benefits or if they are disability benefits. The amount of all benefits increase a little each year. This is due to the Social Security COLA. This sounds like good news. It is true that it is good news, but it can also be bad news for the future. We need a lot of changes to make everything right.
If the COLA increases because of inflation, people collect more in Social Security. This rule is basic, of course. But people don’t collect more in order to be richer and have much more money. People collect more precisely to cope with inflation. This means that with this increase in benefits, pensioners will be able to do the same as before. If prices increase, pensions also have to increase so that everything stays the same.
But what looks like very good news may bring future problems. If the COLA increases Social Security benefits, the trust funds will run out sooner. The math is very simple in this case. With the same amount of money, change is needed to move forward smoothly.
Social Security’s money is in jeopardy
With the COLA increase, the Social Security budget has not gone up. This means we are not looking at an increase where everything is spread evenly. The budget is exactly the same, so the funding of benefits and pensions is in jeopardy. In order to save everything, Congress still has time.
But no one has implemented any of the current proposals. One of the proposals is from Elizabeth Warren and Bernie Sanders. With this proposal, the Social Security trust funds could increase and thus dealing with the COLA and all the inflation would not be a problem for retirement and disability pensioners.
The Warren and Sanders Bill
This proposal has as its centerpiece a tax increase on higher wage earners. When a person earns more than the maximum wage, they would have to pay about 12% in taxes. This change would not mean much for people with high salaries, but it would make a big difference in pension funds.
With this change, the impact would be very large. Not only could Social Security have more funds to deal with inflation and COLA, but it could raise many people’s benefits a bit. This proposal is not yet approved, but if approved it would be a big win for Social Security.