What You Need to Know
- One immediate concern is the fate of Americans born in 1960.
- A change in the benefits formula could slash their benefits.
- The Medicare Part A hospitalization trust fund could run dry in 2024.
As more baby boomers retire and claim Social Security, the worries about the federal program grow, especially in the midst of the coronavirus pandemic, slowing economy and fewer people working to help pay for the program.
We asked several experts their thoughts on what could be expected about Social Security and Medicare next year, other than the planned 1.3% cost-of-living adjustment.
Morningstar’s head of retirement research, David Blanchett, who also provided predictions on the future of retirement income planning, told ThinkAdvisor that he believes the Biden administration will look to fund gaps in both programs, but due to the pandemic and its economic effects, he’s not sure there’s going to be the political will to enact any changes.
“Every year (or day) we, as country, wait to address the issue, the more expensive fixing it becomes, but whatever the fix is, it isn’t going to be easy (or painless),” he said.
“Either it’s going to entail cutting benefits, raising taxes, waiting to get benefits longer, or likely some combination of those, but there’s going to be a decent amount of pain spread across some relatively large number of U.S. citizens,” he added. “Therefore, it’s probably not exactly something that would be regarded as a top priority among many Americans and not something immediately addressed.”
Likewise, Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare, an advocacy group, said the House of Representatives was “likely to take action on Social Security in the 117th Congress,” especially as there’s a “significant” overlap between President-elect Joe Biden’s proposal and the Social Security 2100 Act, sponsored by Rep. John Larson,D-Conn.
However, he said, “Social Security legislation is going to be a heavier lift in the Senate, where any changes in the law require a minimum of 60 votes.”
Richtman added that his group hopes Congress will at least fill the “notch” in Social Security benefits for workers who turned 60 in 2020.
Social Security benefits are based on a worker’s 35 highest years of earnings, which are then indexed to the growth in average wages until the year the worker turns 60. However, those who turned 60 in 2020 could see benefits reduced due to the economic downturn and a drop in the index.
“We also are pressing lawmakers to lessen the burden on workers who are required to repay payroll taxes deferred by an executive order from President Trump last summer,” he said.
Nancy J. Altman, president of the advocacy group Social Security Works, predicts that “the legislation to expand Social Security will be voted out of the [House] in the next Congress and could even get signed into law.” She also says progress is likely on expanding Medicare.
One reason: The need to fix the “notch” will force action on Social Security. “Either a Democratic expansion bill will be enacted or Senate Republicans will block it,” she said. “If Republicans block it, Democrats will have a major campaign issue in 2022” during midterm elections.
Mary Johnson, The Senior Citizens League Social Security and Medicare policy analyst, had several predictions.