Well, depending on who wins, there might be many changes in store or none at all, according to Kelly Campbell, the CEO of Campbell Wealth Management.
If former vice-president Joseph R. Biden Jr. should become the next President of the United States, here are some of the possible changes to the federal insurance program that currently benefits 64 million Americans, and another 178 million workers whose earnings are subject to the Social Security tax, or FICA.
According to Campbell, Biden wants to increase benefits for some individuals (those with income near the poverty level, widows, widowers, and some older retirees). Those ages 78 to 82 would gradually receive an increase in their payments over time. Read Biden’s plan. Read Analysis of the Biden Plan for Social Security.
Also, Campbell says a retiree with more than 30 years of employment would receive 125% above the poverty line, helping the lowest of low-income earners. In addition, the benefits widows and widowers receive would increase by 20%.
To pay for this, the Biden camp supports something called the “donut hole tax,” where everyone with incomes between $0-137,700 would pay regular payroll taxes of 7.65% by the employer and 7.65% by the employee. As a result, there would be no Old-Age and Survivors Insurance (OASI) tax (6.2% for both employer and employee) for anyone, but the 6.2% tax begins again for any income over $400,000.
By contrast, the Trump administration has not put forth any clearly articulated plan related to Social Security retirement benefits.
From his vantage point, the time to fix Social Security is now. “Social Security is this thing that everybody gets, everybody wants to get,” said Campbell. “But it's like this ticking time bomb. Nobody wants to talk about it. Nobody wants to fix it. It's going to run out of money if something's not done with it.”
According to the most recent Social Security trustees report, the OASI Trust Fund, which pays retirement and survivors benefits, will be able to pay scheduled benefits on a timely basis until 2034. At that time, the fund’s reserves will become depleted and continuing tax income will be sufficient to pay 76% of scheduled benefits.
For more, read Campbell’s article, How the Election May Affect Your Retirement, on TheStreet’s Retirement Daily.