Bernie Sanders and Peter DeFazio have introduced the Social Security Expansion Act, which would restore full solvency to the Social Security system by increasing revenues and raising benefits. Under the proposal, payroll taxes would be imposed on earnings over $250,000. A 12.4% tax would be assessed on investment and business income over $250,000 (couples) or $200,000 (individuals), and a 16.2% net investment income tax would be imposed on active S-corporation holders and active limited partners.

The Social Security trustees are projecting an inflation rate of 2.4% under their 75-year, intermediate-cost scenario. According to the 2021 Trustees report (the 2022 edition is due out any day), the combined OASDI Trust Fund will run dry in 2034, after which ongoing revenues will be sufficient to pay about 78% of promised benefits.

With this year’s COLA bumping benefits up by 5.9% and next year’s COLA coming in as high as 7% or 8%, the question arises: will Social Security’s finances worsen as a result of these higher payouts?

A recent report has panned Congressman John Larson’s latest bill to reform Social Security saying it would extend the insolvency date by only four years and that if the provisions were made permanent instead of sunsetting in 2026 would actually move up insolvency by one year.

The Centers for Medicare and Medicaid Services (CMS) has proposed a rule doing away with unnecessary coverage delays following Medicare enrollment. Currently, if a person enrolls in Medicare during the last three months of their Initial Enrollment Period—that is, in one of the three months following their 65th birthday month—Medicare does not become effective until the second or third month after they sign up. If a person misses their initial or special enrollment period and signs up during their general enrollment period from January 1 to March 31, coverage does not start until the following July. Under the proposed rule, coverage in both cases would start the month after enrollment.

The Social Security Administration has announced the resumption of in-person services at local offices starting April 7.

To avoid waiting in line, they strongly encourage people to use their online services or to call and schedule appointments in advance rather than walking in without an appointment.

Offices tend to be the busiest first thing in the morning, early in the week, and during the early part of the month, so clients may want to plan to visit at other times.

Most people have to wait until the annual Social Security Trustees Report is issued—sometime between May and August—to find out how the OASDI trust fund performed the prior year. But if you know where to look (and we do), you can find out as early as March.

If you go to Financial Data for a Selected Time Period and enter the time period you want—calendar year 2021 in this case—you can see how much the trust fund took in, how much it paid out, and the change in asset reserves at the end of the year compared to the start.

Legislation aimed at helping Americans save for retirement is very popular in Congress—as long as it doesn’t address the thorny issue of Social Security solvency.

A new bill that has broad bipartisan support and appears close to passing would expand on 2019 legislation designed to help more people save for retirement. The current bill would require most employers with 401(k)-type plans to automatically enroll employees unless they opt out, sweeten tax credits for startup firms that offer workplace savings plans, promote a benefit for low-income savers, increase catch-up contributions for people in their 60s, and loosen rules to allow more annuity options. It would also raise the RMD age from 72 to 75.

Social Security field offices are scheduled to remain closed through the end of March. Meanwhile, mail is piling up and telephone wait times are excruciating. Between Covid disruptions and budget cuts, service at SSA has never been worse. Thankfully, SSA’s automated systems seem to be working, and clients who apply online for benefits are having no trouble. But widows, who must apply for survivor benefits in person, are facing delays, as are disability applicants and anyone else with an unusual question or request.

This is your chance to tell the advisory community which software tools you like the best. Naturally we are hoping you’ll help make Horsesmouth’s Savvy Social Security Planning Calculators stand out in the Social Security category. In last year’s T3/Inside Information Advisor Software Survey we scored high, but this year should be even better as the very robust capabilities of our calculators become more well known.

The CDC caused a bit of a stir in July 2021 when it announced that life expectancy in the U.S. declined by a year and a half in 2020, primarily due to the pandemic. This was the largest one-year decline since World War II, when life expectancy declined 2.9 years between 1942 and 1943.

According to the CDC, life expectancy at birth is now 77.3 years. At age 65 life expectancy is 17.4 years for men (to age 82.4) and 20.1 years for women (to age 85.1).

The Center for Retirement Research at Boston College just completed a three-part series on the needs and resources available for long-term care.

The first study examined the odds of a 65-year-old developing minimal, moderate, and severe needs, considering both the intensity and duration of the required care. The results show that roughly one-fifth of 65-year-olds never require long-term care and about one-quarter will have severe needs, with the rest falling somewhere in between.

The Medicare Part B base premium will be going up by 14.5% to $170.10 in 2022. All of the IRMAAs will increase as well, however the income levels will be adjusted for inflation and will start at $91,000 for individuals and $182,000 for couples. The annual deductible will be going up by $30 to $233. Here’s the explanation according to CMS.

When it rains it pours. After a long dry spell of Congress pretty much ignoring Social Security despite repeated annual calls by the trustees to pass legislation to restore solvency to the system, there has been a flurry of new bills in the House. On October 26, 2021, Rep. Al Lawson (D-FL) introduced H.R. 5737, Social Security for Future Generations Act of 2021.

The Justice Department and the Social Security Administration have dropped two Trump-era appeals that attempted to deny survivor benefits in cases where couples were either not permitted to marry or not legally married the required nine months even though they had been together for decades. This opens the door to survivor benefits for many people who thought they would be denied such benefits due to SSA’s strict interpretation of its marriage requirements.

Every year since 2014, John Larson, a Democratic representative from Connecticut, has introduced some version of the Social Security 2100 Act. I’ve always considered it a good bill, with something for everyone. In addition to a few tweaks here and there that raised benefits for everyone by a small amount and changed the index used for the COLA, its most important provision called for a gradual raising of the payroll tax, to 7.4% from the current 6.2%, to restore solvency to the system. In September 2019, SSA actuaries determined that if passed, benefits could be paid in full over the next 75 years and the trust fund would never run out.

As everyone has heard by now, the Social Security cost-of-living adjustment for 2022 will be 5.9%. Everyone currently on Social Security will receive a letter in December telling them what their new benefit will be starting in January. Those who haven’t started benefits yet will also have their PIAs raised by the COLA. Make sure your clients understand that they do not need to claim benefits now to get the COLA. (We’ve received a number of questions about this.)

SSA has recently redesigned its statements to show benefit estimates at each age from 62 (or the client’s current age if over 62) through age 70. For clients born in 1955 through 1959, whose FRAs are 66 plus some number of months, the statement shows the estimate for FRA (e.g., 66 and 6 months) as well as age 67. In a few (not all) of the cases that we’ve seen, these amounts are the same. Clearly, they should not be. Each month a client delays application, the benefit amount goes up by a few dollars. (See references at the end for the exact formula.)

In addition to this error, we are seeing mistakes in the DRCs (delayed retirement credits) between FRA and age 70. For example, one statement showed a benefit of $3,223 at 68, $3,459 at 69, and $3,773 at 70. Instead of going up by 8% a year, the benefit went up by 7.3% between 68 and 69 and 9.1% between 69 and 70.

After doing a soft launch of its new redesigned statement last spring, SSA has announced that statements have been redesigned “to provide information to people in clear and plain terms about Social Security’s programs and services.” The agency conducted extensive research, review, and testing to make the updated Statement easy to understand. The new Statement is shorter, uses visuals and plain language, and includes fact sheets tailored to a person’s age and earnings history. Examples of the new Statement and fact sheets are available here (PDF).

Read the full press release here.

Past generations drew down their wealth slowly in retirement, leaving much of their savings untouched. However, this pattern may not hold as the Baby Boomer generation retires, because they are less likely to have a defined benefit (DB) plan and will need to tap the assets in their defined contribution (DC) plans to support their consumption.

The Center for Retirement Research studied the relationship between access to DB plans and the speed at which past generations drew down their wealth. It found that having access to a DB plan was associated with slower drawdown of retirement wealth. The larger the share of retirees’ resources in an annuity-like form — either DB plans, Social Security benefits, or commercial annuities — the slower they drew down their wealth.

Does the news about the Social Security trust fund have an impact on when workers plan to claim their benefits and how much they expect those benefits to be? A recent survey says yes. The Center for Retirement Research at Boston College showed study participants identical articles with different headlines. The headline for the control group reports that Social Security has a “long-term financing shortfall,” but does not directly reference the trust fund. The headlines for the three treatment groups highlight the depletion of the trust fund. The first headline read, “The Social Security Trust Fund Will Deplete its Reserves in 2034.” The second mirrors recent media coverage: “Social Security Fund Headed toward Insolvency in 2034, Trustees Find.” And the third emphasizes ongoing program revenue alongside the trust fund: “Revenues Projected to Cover Only 75 Percent of Scheduled Social Security Benefits After 2034.”