The Social Security Administration will be releasing its annual Cost of Living Adjustment (COLA) and with inflation at decade highs, many people are anticipating the highest increase in Social Security COLA in 40 years. The big question remains, will it even be enough? With food, energy, and even Medicare increasing at a higher rate than Social Security, the COLA may still have retirees feeling the impact of inflation.

With all of the discussion about Social Security going bankrupt or running out of money, we discuss 4 proposed changes to Social Security that would possibly address the solvency of the program.

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Read The Transcript

When it comes to social security, there's some good news, there's some bad news, and there's some changes that might be coming to Social Security, and we're gonna discuss all of that in this video. Hey there, I'm Jonathan Rankin. I'm the founder and CEO of Theor Wealth Management, and I'm here to show you how you can set yourself up for a successful retirement.

Let's start with the bad news first. Social Security is not keeping pace with inflation. In fact, increases in life, expenses like food and even increases in Medicare have been outpacing both social security and inflation. In fact, Medicare increased by 14.5% last year to this year. Social Security, on the other hand, that cost of living adjustment was only 5.9%.

Now, there was a bill introduced back in June called the Social Security Expansion Act. This would've given an additional $200 per month to current Social Security recipients. Anybody who's turning 62 and 2023, that would've been huge for the 66 million people collecting Social Security. Unfortunately, the bill hasn't passed yet, and like anything in Washington, who knows if it ever will.

Now, there is a glimmer of good news coming to Social Security. The cost of Living adjustment is expected to be announced in the next few days, and it's expected to be the largest increase in 40 years, and many people are expecting an 8.7%. On paper, that sounds great, but like they say, not everything that glimmers is gold.

And when you actually look at what's increasing in cost and who it's impacting, you have to ask yourself is 8.7% even enough? Take a look at this chart from the Bureau of Labor Statistics. These are the people who track inflation. Food is up 11.4%. In fact, food at home has gone up even higher than eating out.

So imagine you think you're doing the right thing, trying to save money by eating in instead of going out. You might end up costing yourself even more money depending on what you're eating. I get that overall inflation for all items is at 8.3%, but when you look at your individual life, it actually might be impacting you at a much higher.

Now, aside from the issues around cost of living adjustment, social security has one big issue. The Social Security Program will run outta money by 2035. Now, that's not an attempt to scare you. This isn't some fear mongering, dun dun, dun type headline. In fact, Social Security has even put this on their website and they're very transparent about it.

Now, this doesn't mean that in a little over 12 years, your benefits are gonna go to zero, or that if you're younger, you're not gonna get anything. In fact, they spelled out there, right there for you. They say that they'll be able to pay 80% of benefits in 2035 and 74% of benefits in 2096. So even if nothing changes, it looks like my great, great grandkids might even get some.

No matter what, it's still frustrating to think of your benefits decreasing by 20%. You spend your entire career paying into a system that you expect to be there for you, and then you see your government tap into it from time to time to borrow money from it, and at the end when you need it, only a portion is there for you.

Imagine that in real life. Imagine you tell your daughter to save money when she's younger, so she can afford a car when she gets her driver's license. So from the age of eight, she's out there sling lemonade. On a hot day when she's 10, she starts washing the neighbor's. At 12, she's out mowing lawns, and at 14 you decide, You know what I'm gonna show her That old throwback movie, Clueless.

And from that day, she's hooked on that white Jeep Wrangler that Alicia Silverstone has been driving around that whole time. She's got posters and vision boards in her room, and by the time she turns 16, she'll have spent half of her life working and saving for that Jeep. Now just imagine the look on her face when she gets her driver's license, finds that used Jeep.

Ready to buy it, and you have to tell her, you tapped into her savings so the family could take a cruise a few years back, and now she's got just enough money to buy a used minivan. That would be infuriating. So how does the government plan to fix this? Well, the good news is that both Republicans and Democrats do want to modify social security.

Obviously, they want to do it a little bit differently, but with this being a mid-term election year, I don't think anything's going to happen between now and. After that, the hope is something can get done. In fact, there are four bills that have been proposed mentioned the first one earlier, the Social Security Expansion Act.

This would give the $200 increase, but would also change how the annual Cost of Living Adjustment is calculated so that it better represents what's actually happening in someone's life. This bill would extend the Solvency for Social Security by 75 years, but to do it, it would make all income above $250,000.

Subject to the Social Security payroll. Right now, if you make $147,000 or 20 million, you're paying the same amount of social security tax. They would also make investment income such as dividends or market growth and business income subject to the 12.4% social security tax. Right now, that type of income is exempt from Social Security taxes.

This bill is being marketed as a tax on the wealthy, and in its current form is not supported by Republican. Republicans would prefer an overhaul of the entire Social Security system, so we'll see what happens, especially after the election. The second bill is called Protecting and Preserving Social Security Act, and this would push the depletion date back from 2035 to 2052.

This would also change the computation for Cost of Living adjustment by using the CPI for the elderly. This act would also phase out the income cap on Social Security contributions over the next seven. And encourages contributions over the cap by offering additional benefits in exchange for contributions.

The third bill is called Social Security 2100 a Sacred Trust. This bill would temporarily increase social security benefits by 2% for five years. Among other things, it would reduce social Security 75 years shortfall by about half and postpone by about four years. The program's reserved depletion. To do that, it would impose social security tax on people earning over $400,000.

Now the last bill is called You Earned It, You Keep It Act. This bill would eliminate federal taxes on Social Security payments, cuz right now up to 85% of Social Security benefits may be taxable. This eliminates that tax. Now to pay for that earnings over $250,000 would be subject to Social security tax and this bill could add an additional 25 years of solv.

So it'll be interesting to see if any of these bills pass. I wouldn't expect anything until after the midterm election and depending on the outcome of the election, who knows if anything's gonna get done? If we have a split government, I would expect this issue to keep going on for a while. It's pretty polarizing topic that many politicians don't want to touch, trying to fix.

Social security is complicated, but so is trying to plan for your individual benefits If you have questions on how to maximize your social security benefit, Click the link below. Let's schedule some time to connect. We'd be happy to help you. If you found this video useful, please click the subscribe button.

It helps us continue to put out content like this. Also, if you're thinking about retiring or you're currently retired, there are a lot of questions right now about how falling home prices can affect your retirement. Make sure you check out our latest episode of our retirement podcast called The Retire Once Show where we discuss how a housing market crash impacts your retirement.

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