Updated

Updated · Yahoo Finance · Sep 19

Larson, Blumenthal Reintroduce Social Security Bill to Avert 22% Cuts and Lift Benefits 2%

Updated

Updated · Yahoo Finance · Sep 19

Larson, Blumenthal Reintroduce Social Security Bill to Avert 22% Cuts and Lift Benefits 2%

Q: Will switching to an experimental inflation index actually boost your retirement checks, or push you into a higher tax bracket?

It would most likely boost checks modestly over time, but it could also make more of your Social Security taxable for some retirees. Under the Social Security 2100 Act, annual cost-of-living adjustments would no longer rely only on CPI-W, the index tied to urban wage earners. The bill text says SSA would use CPI-W or CPI-E, whichever produces the higher increase. CPI-E is an experimental Bureau of Labor Statistics index meant to reflect spending by people 62 and older, especially on housing and healthcare. Historically, it has run about 0.2 percentage points higher per year than CPI-W on average, though not every year. That means the gain in any single year may be small, but over a long retirement it can compound into meaningfully larger monthly checks. The trade-off is taxes. A bigger COLA raises your Social Security benefit, and federal tax rules count half of those benefits in “combined income.” If your combined income crosses the long-unchanged thresholds — $25,000 and $34,000 for single filers, $32,000 and $44,000 for married couples filing jointly — then up to 50% or 85% of your benefits can become taxable. That does not mean all of your benefits are taxed, and it does not automatically push you into a higher ordinary income tax bracket, but it can increase your taxable income. So for most retirees, CPI-E would likely mean somewhat larger checks. For retirees near Social Security tax thresholds, part of that increase could be offset by higher federal taxes.

3 articles · Updated · Yahoo Finance · Sep 19

Two Democratic lawmakers reintroduced the Social Security 2100 Act, aiming to prevent automatic benefit cuts projected after the trust fund runs short by the end of 2032.
The proposal would scrap the 2026 payroll-tax cap of $184,500 and add a tax on investment income for taxpayers earning more than $400,000 to raise new revenue.
TSCL estimates those changes could delay trust-fund depletion by as much as 32 years while allowing average benefits to rise 2%.
The bill also would raise the minimum benefit to 125% of the federal poverty line and switch annual COLA calculations to the CPI-E measure focused on older Americans' inflation.