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USA Today
29-05-2025
- Business
- USA Today
President Donald Trump's 'One, Big, Beautiful Bill' breaks a key Social Security promise
President Donald Trump's 'One, Big, Beautiful Bill' breaks a key Social Security promise The president's flagship tax and spending bill is missing a key proposal. And it may not be by accident. Show Caption Hide Caption Social Security uncertainty and policy changes are driving more people to file With a significant rise in Social Security applications, retirees face financial decisions influenced by legislation and economic concerns in today's climate. Scripps News For most Americans, Social Security income isn't a luxury — it's a foundational part of their financial well-being. More than two decades of annual surveys from national pollster Gallup have consistently found that between 80% and 90% of retirees lean on their Social Security check, to some degree, to cover their expenses. For the 52.6 million Americans currently receiving a retired-worker benefit, nothing is more important than knowing how much they'll receive monthly. Many of these retirees have come to realize that a Social Security dollar today isn't what it used to be. Due to inherent flaws in the inflationary index behind annual cost-of-living adjustments (COLAs), the purchasing power of Social Security income has declined by 20% since 2010, based on a July 2024 analysis from nonpartisan senior advocacy group The Senior Citizens League (TSCL). In other words, retired-worker beneficiaries are eager for announcements and/or reforms that would lead to a beefier payout. While on the campaign trail last year, then-candidate Donald Trump announced in all-capital letters on his social media platform Truth Social, "Seniors should not pay tax on Social Security." Now-President Trump doubled down on this claim in a fairly recent town hall event, proclaiming: In the coming weeks and months, we will pass the largest tax cuts in American history — and that will include no tax on tips, no tax on Social Security and no tax on overtime. It's called the 'One, Big, Beautiful Bill'. But there's just one problem with Trump's 'One, Big, Beautiful Bill' — it completely breaks his Social Security promise. Trump's 'One, Big, Beautiful Bill' is missing a key proposal The bill inspired by many of Donald Trump's campaign promises, which passed the House on Thursday, May 22 and is headed to the Senate, calls for an assortment of tax cuts and credits, as well as efficiency-based reductions. While this is far from a complete list of everything the 'One, Big, Beautiful Bill' aims to accomplish, the greater-than-1,000-page bill would: Permanently extend the personal tax cuts passed in the Tax Cuts and Jobs Act (TCJA) in 2017. While the peak marginal corporate income tax rate reduction from 35% to 21% is permanent, the personal tax cuts are currently on track to sunset by Dec. 31, 2025. Increase the deduction for state and local taxes (SALT) to $40,000 from the current limit of $10,000 that was imposed via the TCJA. Phase-outs exist for incomes over $500,000. Expand annual contribution limits for Health Savings Accounts (better known as HSAs) for low and middle earners. Exempt qualified tips (for those earning less than $160,000) from federal income tax through 2028. Allow low and middle earners aged 65 and above to deduct an additional $4,000 on their federal tax return, or $8,000 for couples filing jointly. Eliminate subsidies on federal student loans. Reduce spending on Medicaid and the Supplemental Nutrition Assistance Program by roughly $1 trillion. What's surprisingly missing in this extensive proposal is Trump's pledge to remove the tax on Social Security benefits. In its stead is a measure that would add $4,000 to the standard deduction for seniors aged 65 and older, or $8,000 for couples filing jointly. However, this additional deduction is only available to individuals and couples with respective modified adjusted gross incomes up to $75,000 and $150,000. The tax on Social Security benefits was part of the bipartisan Social Security Amendments of 1983. This last major overhaul of the program also gradually increased the payroll tax and full retirement age for working Americans. Starting in 1984, up to 50% of Social Security benefits could be subjected to the federal tax rate if provisional income (adjusted gross income + tax-free interest + one-half of Social Security benefits) exceeded $25,000 for single filers and $32,000 for couples filing jointly. A decade later, a second tax tier allowed up to 85% of benefits to be taxed at the federal rate when provisional income surpassed $34,000 and $44,000 for individuals and couples filing jointly, respectively. What makes this tax so hated is that these income thresholds haven't once been adjusted for inflation after four and three respective decades. What was once a tax aimed at roughly 10% of senior households now impacts about half of all retiree households. Based on the 'One, Big, Beautiful Bill', this disliked tax isn't going anywhere, which means the president has reneged on his Social Security promise to remove it. Two reasons Trump's efforts to remove the tax on Social Security benefits have been unsuccessful Make no mistake about it, Trump breaking his Social Security promise has nothing to do with popularity. An overwhelming percentage of seniors in an informal TSCL survey favored the idea of eliminating the taxation of Social Security benefits. The real issue for Donald Trump is that what's popular isn't always what's best, or feasible. One reason the president may have reneged on his Social Security promise is because of the financial implications of what he proposed. Although eliminating the tax on benefits would have boosted what around half of retired-worker beneficiaries would get to keep for a few years, it would have had disastrous effects on Social Security's financial health. In the 2024 Social Security Board of Trustees Report, the Trustees estimated the Old-Age and Survivors Insurance Trust Fund (OASI) would exhaust its asset reserves — i.e., the excess income built up since inception that's currently invested in interest-bearing government bonds — by 2033. Though asset reserves aren't required for the OASI's solvency, the depletion of these reserves would necessitate sweeping benefit cuts of up to 21% for retired workers and survivors. If President Trump had been successful in removing the tax on benefits, it would have ended one of the program's three sources of income and expedited the timeline to the OASI's asset reserve depletion. Further, there's a strong likelihood it would also increase the percentage benefits would need to be cut to sustain payouts over the next 75 years. The other issue for Trump is that it's unlikely he would have the necessary votes to remove the tax on benefits. Amending the Social Security Act requires 60 votes in the Senate. It's been 46 years since either party held a supermajority of 60 seats in the upper house, which means all legislation aimed at amending Social Security requires bipartisan support. Democrats and Republicans have found little common ground when amending Social Security since the Amendments of 1983 were signed into law. More than likely, none of the 45 Democrats and two Independent senators in the upper house would vote in favor of Trump's proposal. It's also not clear if all 53 Republicans would be on board with the president's call to eliminate the tax on benefits. Rather than risk a potentially embarrassing defeat or holding up the 'One, Big, Beautiful Bill', this Social Security promise was (likely) purposely left out. Regardless of the precise reason this proposal was shelved, taxing Social Security benefits, no matter how disliked or unpleasant, is a necessity for a social program facing the possibility of sweeping payout cuts in just eight years. The Motley Fool has a disclosure policy. The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY. The $23,760 Social Security bonus most retirees completely overlook Offer from the Motley Fool: If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets"could help ensure a boost in your retirement income. One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. JoinStock Advisorto learn more about these strategies. View the "Social Security secrets" »
Business Mayor
14-05-2025
- Business
- Business Mayor
Social Security cost-of-living adjustment for 2026 is projected to be lowest in recent years. Why that may change
Customers shop for produce at an H-E-B grocery store on Feb. 12, 2025 in Austin, Texas. Brandon Bell | Getty Images The Social Security cost-of-living adjustment for 2026 is on pace to be the lowest annual benefit increase in five years, according to new estimates. But that may change depending on the pace of inflation in the coming months. The COLA may be 2.4% in 2026, according to new projections from both Mary Johnson, an independent Social Security and Medicare policy analyst, and The Senior Citizens League, a nonpartisan senior group. If that increase goes into effect next year, it would be lower than the 2.5% boost to benefits Social Security beneficiaries saw in 2025. It would also be the lowest cost-of-living adjustment since 2021, when a 1.3% increase went into effect. More from Personal Finance: Here's the inflation breakdown for April 2025 — in one chart Ways to save on groceries amid food price inflation How to land a new job in a 'low firing, low hiring' market The Social Security COLA provides an annual inflation adjustment to all of the program's beneficiaries, including retirees, disabled individuals and family members. The annual adjustment for the next year is calculated by comparing third-quarter inflation data for the current year to the previous year. The year-over-year difference determines the annual increase. However, if there is no rise in the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, from year to year, the COLA may be zero. The CPI-W, used to calculate Social Security's COLA, increased by 2.1% over the past 12 months, according to data released Tuesday by the Bureau of Labor Statistics. In the months ahead, two factors may affect retirees' cost of living, experts say. Tariffs may push inflation higher Inflation, as measured by the broader consumer price index, sank to its lowest 12-month rate at 2.3% in April since 2021. Yet tariffs may push the inflation rate higher in the months ahead, if those taxes imposed on imported goods go into effect. Tariffs would prompt higher consumer prices and inflation. If that happens in the months ahead, the Social Security cost-of-living adjustment estimate for 2026 may move higher. 'This year will be a closer year to watch because of the tariffs,' Johnson said of the 2026 COLA estimate, which is recalculated every month with new inflation data. The official COLA for the following year is typically announced by the Social Security Administration in October. Prescription drug costs President Donald Trump on Monday issued an executive order taking aim at high prescription drug costs in the U.S. The White House hopes to bring those prices in line with other countries. The policy would apply to Medicare and Medicaid, in addition to the commercial market, according to the White House. Changing drug prices would be unlikely to impact the COLA estimate, according to Johnson. But retirees would see an impact to their personal budgets if drug prices came down, she said. Many details of the executive order still need to be fleshed out, noted Leigh Purvis, prescription drug policy principal at the AARP Public Policy Institute. Yet the nonprofit organization, which represents Americans ages 50 and up, praised the Trump administration's efforts to curb big drug companies' ability to charge retirees high prices for necessary prescriptions. 'A lot of people are aware that prescription drug prices are too high, and I think a lot of people are aware that we're paying a lot more than other countries,' Purvis said. 'So any efforts moving us in the direction of paying less and paying something that's more comparable to the rest of the world, I think is something that people could probably get behind,' she said. READ SOURCE
CNBC
13-05-2025
- Business
- CNBC
Social Security cost-of-living adjustment for 2026 is projected to be lowest in recent years. Why that may change
The Social Security cost-of-living adjustment for 2026 is on pace to be the lowest annual benefit increase in five years, according to new estimates. But that may change depending on the pace of inflation in the coming months. The 2026 COLA may be 2.4% in 2026, according to new projections from both Mary Johnson, an independent Social Security and Medicare policy analyst, and The Senior Citizens League, a non-partisan senior group. If that increase goes into effect next year, it would be lower than the 2.5% boost to benefits Social Security beneficiaries saw in 2025. It would also be the lowest cost-of-living adjustment since 2021, when a 1.3% increase went into effect. More from Personal Finance:Here's the inflation breakdown for April 2025 — in one chartWays to save on groceries amid food price inflation How to land a new job in a 'low firing, low hiring' market The Social Security COLA provides an annual inflation adjustment to all of the program's beneficiaries, including retirees, disabled individuals and family members. The annual adjustment for the next year is calculated by comparing third quarter inflation data for the current year to the previous year. The year-over-year difference determines the annual increase. However, if there is no increase in the the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, from year to year, the COLA may be zero. The CPI-W, used to calculate Social Security's COLA, increased by 2.1% over the past 12 months, according to data released Tuesday by the Bureau of Labor Statistics. In the months ahead, two factors may affect retirees' cost of living, experts say. Inflation, as measured by the broader Consumer Price Index, sank to its lowest 12-month rate at 2.3% in April since 2021. Yet tariffs may push the inflation rate higher in the months ahead, if those taxes imposed on imported goods go into effect. Tariffs would prompt higher consumer prices and inflation. If that happens in the months ahead, the Social Security cost-of-living adjustment estimate for 2026 may move higher. "This year will be a closer year to watch because of the tariffs," Johnson said of the 2026 COLA estimate, which is recalculated every month with new inflation data. The official COLA for the following year is typically announced by the Social Security Administration in October. President Donald Trump on May 12 issued an executive order taking aim at high prescription drug costs in the U.S. The White House hopes to bring those prices in line with other countries. The policy would apply to Medicare and Medicaid, in addition to the commercial market, according to the White House. Changing drug prices would be unlikely to impact the COLA estimate, according to Johnson. But retirees would see an impact to the personal budgets if drug prices came down, she said. Many details of the executive order still need to be fleshed out, noted Leigh Purvis, prescription drug policy principal at AARP Public Policy Institute. Yet the nonprofit organization, which represents Americans ages 50 and up, praised the Trump administration's efforts to curb big drug companies' ability to charge retirees high prices for necessary prescriptions. "A lot of people are aware that prescription drug prices are too high, and I think a lot of people are aware that we're paying a lot more than other countries," Purvis said. "So any efforts moving us in the direction of paying less and paying something that's more comparable to the rest of the world, I think is something that people could probably get behind," she said.
Yahoo
26-04-2025
- Business
- Yahoo
Why Dave Ramsey Thinks Social Security Is a ‘Mess' — And What You Can Do About It
With Social Security facing serious challenges, Dave Ramsey is sounding the alarm. In a recent blog post on Ramsey Solutions, the personal finance expert didn't hold back, calling the system a 'mess' and urging Americans to take their retirement planning into their own hands. With growing uncertainty around the program's long-term stability, many are left wondering what role Social Security will realistically play in their future. Be Aware: Find Out: Here's why Ramsey believes Social Security is falling short and what experts say you can do to stay ahead. Social Security was never meant to fully fund retirement. It was designed as a supplement, not a safety net you can live off entirely. But according to a survey conducted by The Senior Citizens League, 27% of seniors have only Social Security benefits as income. The Social Security Trustees Report projects that the combined Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds to be depleted in 2035. If nothing changes, this could result in a 17% benefit cut in 2035. Ramsey pointed to this looming shortfall as just one sign that the system is in trouble. He argued that the imbalance between the number of workers paying into the system and the number of retirees drawing from it is unsustainable. With people living longer and fewer workers supporting more retirees, the math doesn't add up. Read Next: Given these challenges, Ramsey advises individuals to take personal responsibility for their financial futures. He recommends building retirement savings through consistent investing and not relying solely on Social Security. Robert R. Johnson, Ph.D., CFA, CAIA, professor of finance at Heider College of Business at Creighton University, doesn't agree with everything Ramsey recommends, but agrees on the importance of building retirement savings. 'Planning so that Social Security benefits can be considered the 'dessert' of your retirement spending is very prudent,' Johnson said. 'One certainly wants to err on the side of accumulating more wealth than less when it comes to your retirement nest egg.' To avoid over-relying on Social Security, here are some strategies to consider. 'The earlier you start saving for retirement, the more time your money has to grow through compound interest,' said Jake Falcon, founder and CEO at Falcon Wealth Advisors. He suggested contributing regularly to tax-advantaged retirement accounts, such as 401(k) plans, IRAs or Roth IRAs, as well as a health savings account (HSA), which can be used for medical expenses. Take advantage of employer matching contributions to your retirement plan. 'This is essentially free money that can significantly boost your savings,' Falcon explained. 'I can't stress this enough: If your employer offers a benefit this lucrative, you almost can't afford not to take it.' A diversified investment portfolio can help you better manage risk and provide more stable returns over time. 'Consider a mix of stocks, bonds, real estate and other assets to mitigate risk,' Falcon explained. 'Most importantly, you want to make sure your investments are lined up with your financial plan.' Consider adding additional sources of income, such as rental properties, dividends from investments or part-time work in retirement. 'Many retirees are still earning some sort of wage. It can be a great to stay active, as well,' Falcon added. Healthcare costs can be a significant expense in retirement. 'Consider what your plan for long-term care is and leverage health savings accounts to cover potential medical costs,' Falcon said. 'Life circumstances and financial markets change, so it's important to review your retirement plan regularly and make adjustments as needed,' Falcon explained. 'I would not make adjustments based on market fluctuations — instead, adjust your plan when your life changes.' More From GOBankingRates 6 Used Luxury SUVs That Are a Good Investment for Retirees 7 Tax Loopholes the Rich Use To Pay Less and Build More Wealth 7 Overpriced Grocery Items Frugal People Should Quit Buying in 2025 How Much Money Is Needed To Be Considered Middle Class in Every State? This article originally appeared on Why Dave Ramsey Thinks Social Security Is a 'Mess' — And What You Can Do About It
Yahoo
18-04-2025
- Business
- Yahoo
This Estimate of Social Security's 2026 Cost-of-Living Adjustment (COLA) Was Just Revised. Here's How Tariffs Could Impact Your Benefits.
Millions of American seniors rely on Social Security to make ends meet. Half of households with someone age 65 or older rely on the government program for the majority of their incomes, according to data reviewed by the Social Security Administration. That makes the annual cost-of-living adjustment, or COLA, an extremely important number for households trying to keep up with the rising costs of goods and services. While we're still about six months away from determining the exact raise Social Security beneficiaries will receive in 2026, early data suggests seniors might be disappointed with next year's increase. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » Tariffs could change all of that. Here's where things stand today and how tariffs could impact your benefits next year. The cost-of-living adjustment, as the name implies, is designed to help keep Social Security in line with the cost of living. While Social Security began sending out monthly checks in 1940, Congress didn't automate the system for calculating the COLA until 1975. The COLA is now based on a measure of inflation called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This is a single number released by the Bureau of Labor Statistic each month aggregating price changes in over 200 spending categories. The number changes based on whether prices went up or down for each category. In order to calculate the COLA in time for January benefits checks, the Social Security Administration uses the average year-over-year increase in the CPI-W during the third quarter. That number becomes the following year's COLA. If it's negative, seniors won't see any adjustment. Many argue the CPI-W doesn't reflect the true costs seniors face today. The Bureau of Labor Statistics developed a new CPI reading in 1987, which weighs the various spending categories to align with the expenses of Americans age 62 and older. It's called the Consumer Price Index for the Elderly, or CPI-E, and many feel the COLA should be based on those readings, instead. While the CPI-E and CPI-W can vary considerably from year to year, over the last 15 years, they've produced similar cumulative results. For now, Social Security is still using the CPI-W, and one forecast suggests it could result in a disappointing COLA for 2026. Senior advocacy group The Senior Citizens League publishes updates to its forecast for the COLA after every monthly CPI release from the Bureau of Labor Statistics. The most recent release came on April 10, which showed March CPI-W came in 2.2% higher than the same month last year. That's a marked slowdown from February's 2.7% increase and January's 3% increase. Despite the slowdown, The Senior Citizens League increased its estimate for the 2026 COLA to 2.3%. That's still less than the 2025 COLA of 2.5% and a significant slowdown from 2021 through 2024. Many seniors may find it's not enough for their budgets. March showed very little impact from President Trump's tariff policies. As a result, The Senior Citizens League estimate doesn't include the potential changes to the COLA that could stem from higher prices on imported goods. While the government paused most of the massive tariffs it planned to impose on countries with large trade surpluses to the United States, it's maintained a 10% tariff on all imports, 25% on auto parts, and 25% tariffs on Mexico and Canada. Tariffs against Chinese imports haven't received any reprieve and sit at 145%, as of this writing. These tariffs could impact the price of just about everything American's consume. From cars to groceries to clothing to prescription drugs, the United States relies heavily on cross-border trade. While some argue that tariffs will provide relative strength to the dollar, which would offset the tariffs, most economists expect the new taxes to increase inflation. It's worth noting the U.S. Dollar index has fallen to a three-year low following the tariff announcement. The impact of the tariffs won't be felt right away, but it seems likely it'll hit consumer's wallets by summer. That's exactly when the CPI numbers start counting for next year's cost-of-living adjustment. That could mean a higher COLA for seniors, but it would come at a significant cost. Remember, there's a significant lag time between the CPI reading and the COLA going into effect -- up to six months. That means seniors could be struggling to keep up with tariff-induced inflation while hoping for a COLA big enough to help them catch up in 2026. Seniors should prefer slow and steady inflation, which allows the COLA to accurately reflect the increase in their costs. Unfortunately, that's an unlikely scenario with tariffs in place. If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known could help ensure a boost in your retirement income. One easy trick could pay you as much as $22,924 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these Motley Fool has a disclosure policy. This Estimate of Social Security's 2026 Cost-of-Living Adjustment (COLA) Was Just Revised. Here's How Tariffs Could Impact Your Benefits. was originally published by The Motley Fool
