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It's no secret that presidential candidate Bernie Sanders wants to expand Social Security. In fact, he introduced legislation last year intended to do just that. Here are the details of Sanders' stance on Social Security, how he wants to expand the program, and how he intends to pay for it.
Bernie Sanders' position on Social Security
Sanders believes that Social Security has been a highly successful program, for the most part. For one thing, the senior citizen poverty rate in the U.S. is 10% today, down from nearly 50% before Social Security started. Social Security has also paid all of the benefits it has ever promised and has done so in a timely manner.
However, he feels there is still a lot of work to be done and that Social Security is more important now than ever, since more than one-third of seniors are practically 100% dependent on their Social Security benefits. In Sanders' mind, no retiree should be living in poverty and Social Security should be expanded for all retirees. He also believes cost-of-living adjustments should be more reflective of the actual inflation rate experienced by seniors.
The current state of Social Security
As I've written before, Social Security is unsustainable in its current form, but it's far from "broke" or "in crisis," as many in the media would have you believe. In fact, between the money in the Social Security trust fund and the payroll taxes coming in, Social Security can pay every cent it's promised to current and future retirees until 2034, and three-fourths of those benefits afterwards, according to the Social Security Trustees' report.
Having said that, it's what happens after 2034 and in the meantime that's the concern. Only being able to pay three-fourths of benefits after that date means that Social Security isn't completely sustainable in its current form, so changes will need to be made to preserve retirees' benefits. There are only two main ways to fix it benefit reductions or tax increases.
How Sanders wants to fix Social Security
Not only does Sanders want to preserve benefits; he wants to expand Social Security for most retirees. In 2015, Sanders introduced a bill known as The Social Security Expansion Act, which would make the following changes:
- An average $65-per-month benefit increase for most Social Security recipients.
- A change in the index used for cost-of-living adjustments from the Consumer Price Index for Urban Wage Earners and Clerical Workers to the Consumer Price Index for the Elderly. The CPI-E has grown 0.2% faster on average than the CPI-W currently being used.
- An increase in the minimum benefit amount for lifetime low-income workers.
This expansion would be paid for by two tax increases on high-income Americans. First, all earned income above $250,000 would be subject to the payroll tax (it isn't now), which is 6.2% for both employers and employees. Second, investment income, such as capital gains and dividends, above $250,000 would also be subject to a 6.2% tax.
According to the legislation, not only would these increases be enough to fund the proposed expansion, but it would also extend the solvency of Social Security for the next 45 years (50 years, according to Sanders' campaign website).
What it could mean to you
Unless you're in the upper income brackets, Sanders' plan wouldn't result in higher Social Security taxes for you and your family.
Lower-income workers would experience the biggest change. As of 2015, the minimum Social Security benefit for a worker with 30 or more "years of coverage" is $829.80 per month ($9,957.60 per year). The federal poverty level for individuals is currently $11,880, and since one of the primary objectives of Sanders' plan is to dramatically reduce the number of seniors living in poverty, it's likely that the new minimum benefit would make up the difference.
For most other Social Security beneficiaries, the $65 monthly increase could result in a significant lifestyle boost. This translates to $780 per year, and since the average Social Security benefit for a retired worker is just over $16,000 per year, this represents a "raise" of nearly 5%.
To sum it up, Sanders' Social Security plan is to raise taxes on the top 1.5% of earners, while increasing Social Security benefits for virtually everyone else.
The article How Would Bernie Sanders Change Social Security? originally appeared on Fool.com.
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