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Social Security Benefits Could Rise Nearly 4% in 2027

Social Security recipients could see their monthly benefits increase by nearly 4% next year, according to early projections for the 2027 cost-of-living adjustment (COLA).

CBS News reported that estimates from retirement and senior advocacy groups currently place the increase between 3.6% and 3.8%, although the final figure will not be determined until October.

The Senior Citizens League is projecting a 3.8% COLA for 2027, while AARP has estimated a slightly lower increase of about 3.6% based on current inflation trends.

The Social Security Administration will calculate the official adjustment using inflation data from July, August, and September.

The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as CPI-W.

The formula uses the average CPI-W reading from the third quarter of the year to determine the following year's benefit increase.

Some senior advocates have argued that CPI-W does not accurately reflect the spending patterns of older Americans, whose budgets often are more heavily affected by costs such as health care, housing, and food.

Groups including AARP have supported using an alternative measure, known as the Consumer Price Index for the Elderly, or CPI-E, which would more closely track expenses for seniors.

If the increase reaches the higher end of current estimates, the average retired worker receiving about $2,000 per month could see an increase of roughly $75 to $80 per month.

The actual increase will vary depending on each recipient's current benefit amount.

The projected increase would follow a 2.8% COLA for 2026 and come after several years of larger adjustments driven by elevated inflation.

Social Security benefits rose 8.7% in 2023, the largest annual increase since 1981, after inflation surged in the wake of the pandemic.

The final 2027 COLA announcement is expected in October, with the new benefit amounts scheduled to take effect in January 2027.

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Bipartisan Senate Bill Addresses Social Security Shortfall

With Social Security's looming insolvency date roughly six years away, a bipartisan group of lawmakers introduced a proposal Tuesday to grapple with one of the most consequential financial challenges facing the federal government.

The Protecting Retirement Opportunities and Maintaining Income Security for Everyone, or PROMISE Act, comes on the heels of the latest Social Security Board of Trustees' annual report, which found that Social Security's retirement trust fund is projected to face a funding shortfall in 2032, a year earlier than last year's projections.

"The longer Congress waits, the more difficult it will be to address the program's financial shortfall," Sen. Dick Durbin, D-Ill., one of the bill's authors, said in a statement. "We were elected to solve problems — we owe it to our kids and grandkids to protect and strengthen this critical program."

Durbin, who is retiring, is joining with Sen. Tim Kaine, D-Va., Sen. Angus King, I-Maine, and outgoing Sens. Bill Cassidy, R-La., John Cornyn, R-Texas, and Thom Tillis, R-N.C., in backing the Social Security legislation, which calls for an "independent, bipartisan advisory committee" that would make recommendations to Congress.

Sens. Chris Coons, D-Del., and Alan Armstrong, R-Okla., signed onto the bill right before its introduction.

The bill is designed to force Congress to confront Social Security's long-term financing problem by guaranteeing that lawmakers vote on a solvency plan. It culminates in an up-or-down vote on a plan that restores Social Security solvency for at least half a century.

Social Security's looming funding shortfall is mainly the result of lower projected birth rates, reduced immigration and reduced trust fund revenue, according to the Board of Trustees' report.

The looming challenge for the programs is a partial funding gap, not a collapse. Even after trust fund depletion, the system will continue issuing benefits, albeit at reduced amounts.

Traditionally, Republicans have been skeptical of endorsing tax increases, while Democrats have been critical of calls to raise the age of Social Security eligibility. In 2022, members of the House Republican Study Committee proposed raising the age at which someone could qualify for Social Security and Medicare.

Social Security benefits were last reformed roughly 40 years ago, when the federal government raised the eligibility age for the program from 65 to 67, based on recommendations from a commission under the leadership of Alan Greenspan.

Still, there are ongoing bipartisan calls to find a way to provide long-term funding to Social Security.

Last month, Sens. Elizabeth Warren, D-Mass., and Bernie Moreno, R-Ohio, wrote an editorial in The New York Times calling for raising the cap on the Social Security payroll tax.

For 2026, the payroll tax cap, or maximum amount of earnings on which you must pay Social Security tax, is $184,500.

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Social Security legislation, which calls for an "independent, bipartisan advisory committee" that would make recommendations to Congress.

More death by committee. No legislation to fix it, just more study. More kick the can down the road.

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Protecting Retirement Opportunities and Maintaining Income Security for Everyone, or PROMISE Act

Who comes up with this shit?

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in backing the Social Security legislation, which calls for an "independent, bipartisan advisory committee" that would make recommendations to Congress.

Heres one, stop raiding SS money to help pay for all the BS graft projects, defund all NGO's and make it illegal to use an NGO or any organization that will function like an NGO,

Stop the open loopholes for theft of government money and Tax all congressional members stock holdings at 30% of it's value of their portfolios while in office.

Maybe fix your own house, then we can talk about SS reform and how to improve the system for recipient's considering how the feds created hyperinflation that devalued the dollar.

But wait, it gets worse:
It's not just Social Security, it's Medicare too...

New CRFB Estimate Shows Steep Cost of Social Security Inaction

If Congress fails to address program's projected 2032 insolvency, a typical newly retired dual-income couple could see annual benefits cut by $16,900

If nothing were done by Congress to shore up Social Security before the program reaches projected insolvency in late 2032, the estimated 22% benefit cut resulting from insolvency means a typical newly retiring dual-earning couple would lose $16,900 in annual benefits at the start of 2033.

That’s according to a new estimate released July 16 by the nonpartisan Committee for a Responsible Federal Budget. Thursday’s release points out that Social Security is just 6 years from insolvency according to the program’s recent 2026 Trustees Report. At that point, the law requires benefits to be reduced to ensure the program’s costs do not exceed its revenues.

Large benefit cuts looming

And then in 2033, CRFB points out that the Medicare Hospital Insurance trust fund is projected to become insolvent, cutting spending by 11%, which would threaten retirees’ healthcare access while they experience the Social Security shock to their incomes.

The size of these benefit cuts would vary with a couple’s age, marital status, and work history. For example, a typical single-income couple would face an annual loss of $12,700 while a dual-earning, low-income couple would face a yearly cut equal to $10,200. And high-income couples would see cuts as large as $22,300.

While the absolute size of these cuts would be smaller for low-income couples than high-income couples, they would also be a larger share of total incomes for low-income retirees and hence more financially disruptive. The cuts are in nominal dollars and would be about 15% smaller when adjusted for inflation.

“These benefit cuts are smaller than we estimated last year—due mainly to the higher near-term revenues and lower near-term costs projected in this year’s Trustees’ Report,” said the CRFB release. “However, these cuts are projected to grow over time due to the rising gap between Social Security’s costs and dedicated revenues. At the end of the century, annual benefit cuts are expected to reach 35%.”

With insolvency just 6 years away, senators elected in November will be in office when the fund is projected to run dry. CRFB says policymakers should urgently begin the work of restoring Social Security’s long-term solvency.

“Social Security is the bedrock of our nation’s retirement system, and Washington’s failure to secure its finances has put the retirement security of tens of millions of seniors in jeopardy,” said CRFB President Maya MacGuineas in a statement this week in support of the PROMISE Act. “Any credible effort to help save Social Security—whether through a commission, the Social Security Advisory Board (SSAB), specific policies, or committee process—is a step in the right direction.”

The PROMISE Act would instruct the bipartisan Social Security Advisory Board (SSAB) to submit a “base bill” to extend solvency and then establish a process for Congress to consider, amend, and potentially pass the bill. Absent an SSAB proposal, the legislation allows the House and Senate majority leaders to put forward their own base bill, or else any bipartisan pair in the House or Senate may do so. Initial and final legislation would be required to achieve at least 50-year solvency, and a new decennial solvency review process would also be created.

“These proposals keep Congress and the public involved in this important process,” MacGuineas said. “Hopefully they can give our leaders the kick in the pants they need to start working together to secure Social Security for current and future generations.”

CRFB has proposed several novel solutions of its own over the past year—an Employer Compensation Tax, a Social Security COLA Cap, and a Six Figure Limit on Social Security benefits—to help kickstart the work of finding trust fund solutions.

https://401kspecialistmag.com/...utm_campaign=weekend

No surprise that Medicare is also going bust in the near future. Being a government program, waste, fraud, and abuse are rampant. No government program is more cost efficient than the free market.

It was either Thomas Sowell or Walter Williams who explained the hierarchy of bang-for-the-buck.

The most efficient is a person spending his own money for his own benefit. He will find the best tradeoffs for his needs. Supplier competition will provide the best array of options to buyers.

The second most efficient is spending you own money for someone else's benefit. You are price conscious but you don't care as much about how well the product meets the recipient's needs as you are when you buy for yourself.

The next most efficient is spending someone else's money for your own benefit. You won't be price conscious but you'll look for a good product that meets your needs.

The worst is spending someone else's money for other people's benefit. You don't care about either cost or quality.

At least with SS the government is controlling how the money is spent.

Guess who turns 65 in 2032! Yup, yours truly.