Social Security provides monthly income for millions of retirees, helping cover basic living costs such as utilities, food, and medication. The program faces a pending revenue shortfall as scheduled benefits are expected to exceed payroll tax revenue in coming years. If trust funds run out, Social Security may need broad benefit cuts, potentially reducing benefits by more than 20% and pushing many seniors into poverty. Social Security also uses annual cost-of-living adjustments based on CPI-W, which is intended to protect purchasing power from inflation. CPI-W does not accurately capture the costs faced by Social Security recipients, creating a flawed COLA system.
"In the coming years, Social Security expects to owe more money in scheduled benefits than it collects in payroll tax revenue. Once the program's trust funds run out of money, Social Security might have to broadly cut benefits unless lawmakers find a way to shore up its finances. Those cuts won't necessarily be small ones. Seniors could see their benefits reduced by more than 20%, which would push a lot of people into poverty in the absence of lawmaker intervention."
"Social Security could be a mere six years away from potential benefit cuts. Yet so far, there's not a single solution that seems to have garnered bipartisan support. Of course, preventing Social Security cuts is not an easy task. And the solutions available to stave off cuts have their own drawbacks. But lawmakers do need to act quickly if they want to prevent Social Security cuts - and the massive crisis that could erupt as a result."
"Social Security benefits are eligible for a cost-of-living adjustment (COLA) every year. COLAs are supposed to protect benefits from losing buying power due to inflation. The problem is that those COLAs are based on changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). And the CPI-W does not do an accurate job of capturing the costs Social Security recipient"
Read at 24/7 Wall St.
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