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Senators Propose Boosting Seniors' Social Security Benefits

Millions of seniors nationwide are among those who rely on the financial support they receive each month via their Social Security benefits checks.

However, many say that these payouts have failed to keep up with inflation and the escalating prices of basic goods and services over time. One analysis showed that retirees have in fact lost significant buying power in the past two decades, all while they tend to face steep increases in health care costs as they age. As of 2023, Social Security benefits experienced one of the biggest losses of purchasing power – 36 percent – since 2000.

A newly introduced bill seeks to remedy this.

The Cost-of-Living Adjustment (COLA)

At the end of each year, the Social Security Administration (SSA) informs Social Security recipients about how much they can expect to see in their payouts for the forthcoming year. Benefits typically undergo some level of change based on the SSA’s annual cost-of-living adjustment (COLA). In 2024, COLA rose slightly, by 3.2 percent. For the average retiree, that equates to receiving about $59 more per month compared with 2023.

The year prior to that, COLA had increased by 8.7 percent. Current predictions for 2025’s COLA are coming in at about 2 percent.

Today, COLA calculations are based on a metric known as the Consumer Price Index for Urban Wage Earners (CPI-W). This is where the recently proposed legislation focuses on making a change.

Boosting Benefits and COLAs for Seniors Act

In late March 2024, U.S. Sen. Bob Casey (D-PA) introduced the Boosting Benefits and COLAs for Seniors Act. Four Democratic senators are serving as co-sponsors: Richard Blumenthal of Connecticut, John Fetterman of Pennsylvania, Kirsten Gillibrand of New York, and Vermont’s Bernie Sanders, plus Peter Welch, an independent from Vermont.

The Act centers on changing the formula that the SSA uses to calculate Social Security benefits for older adults. It proposes using a different metric, the Consumer Price Index for the Elderly (CPI-E). Incorporating the CPI-E into the equation would, according to advocates, better reflect the specific types of costs facing subgroups like seniors.

As co-sponsor Sen. Gillibrand puts it, the bill would “factor the high cost of health care into Social Security benefits calculations.” In turn, this would mean bigger payouts for seniors and, she adds, would “help make sure recipients aren’t forced to choose between paying for their medication and buying other necessities.”

Nearly a dozen different agencies, including Arc of the United States, the Alliance for Retired Americans, and Justice in Aging, have endorsed the bill.

Retirees: Deduct Your Long-Term Care Insurance Premium

Even if you have a long-term care insurance policy, you may likely be hoping that you won't ever have reason to use it. Regardless of what the future holds, there's one silver lining of which you may not be aware. That is, premiums on many long-term care insurance policies are in fact tax-deductible.

What Is Long-Term Care Insurance?

Long-term care insurance, or LTCI, can help you prepare for covering the cost of care in a nursing home facility or other setting when and if you need it. Unfortunately, the likelihood that you’ll need long-term care services at some point is high. In fact, about 70 percent of older adults find themselves having to rely on at least some long-term care in their later years.

When individuals require long-term care, it means that they need assistance when completing activities of daily living (ADLs). These basic daily tasks include dressing oneself, showering, or moving safely from one place to another in one's household, such as from the bed to the bathroom, or in and out of one's chair. In most cases, your LTCI policy will begin covering long-term care services if you cannot perform at least two ADLs on your own.

The cost of LTCI policy premiums can be out of reach for many people, and some insurers have been raising premiums over the course of time. According to one 2022 survey by HCG Secure, a mere one in 10 of Americans older than 65 have a long-term care insurance policy. However, if you have purchased a tax-qualified plan, you may be able to deduct the insurance premium as a medical expense.

Is My Long-Term Care Insurance Policy Tax-Deductible?

You can deduct numerous types of medical and dental expenses from your taxes. In addition to qualified long-term care insurance premiums, other deductible health expenses include the following:

• prescription medications and insulin
• substance use disorder inpatient treatment or smoking-cessation programs
• prescription or reading eyeglasses
• contact lenses
• hearing aids
• X-rays
• artificial teeth
• acupuncture treatments
• the cost of caring for a guide dog for a person with a vision or hearing disability

When filing your 2023 federal income taxes, check with your insurance broker or state insurance commission to determine whether your LTCI policy qualifies.

Only certain long-term care insurance policies meet the criteria for a tax deduction. The National Association of Insurance Commissioners sets these rules. Typically, many hybrid long-term care policies do not qualify for a premium deduction. (For more information on what defines a qualified LTCI contract, consult the IRS’ Publication 502 for the current tax year.)

If your policy does qualify, you can deduct your LTCI policy premium up to a specified limit. Keep in mind that you will only be eligible for a tax deduction if all of your eligible medical expenses totaled more than 7.5 percent of your adjusted gross income for the year.

Select states also offer LTCI tax incentives, so be sure to check with your tax advisor. Note, too, that if you are self-employed, the rules regarding these deductions can differ.

How Much Can I Deduct in 2024?

If your annual LTCI policy premium is higher than the limit provided in the table below, it will count as a medical expense. The older you are, the higher your deductible limit. For example, if you are a 75-year-old individual at the end of 2023, you may be able to deduct up to $5,880 in LTCI premiums as qualified medical expenses.

Table 1. 2024 LTCI Tax Deductible Limits.

Attained Age Before the Close of 2023	Maximum Deduction in 2024
Age 40 or younger	$470
Age 41 to 50	$880
Age 51 to 60	$1,760
Age 61 to 70	$4,710
Age 71 and older	$5,880

These are lower deduction limits than in previous years. The Internal Revenue Service adjusts these limits each year.

The cost of long-term care services can in large part depend on where you live. Check out this online tool to get an estimate based on your ZIP code.

The ins and outs of LTCI products can prove to be complicated. Consult with your attorney; they can provide guidance on purchasing an LTCI policy and also assist you in planning for the possibility that you will need long-term care in the future.

Most US Workers Say They Will File for Social Security Early

To secure the maximum amount in monthly Social Security retirement benefits, Americans must wait until full retirement age to start receiving their payouts. Results from a 2023 survey show that most of today’s workers know about this stipulation – and yet the vast majority say they’re willing to file for their Social Security benefits early anyway.

UK-based wealth management company Schroders surveyed 2,000 working Americans to learn more about their readiness for and perspectives on retirement. The results showed that a mere 10 percent of respondents said they plan to hold off until age 70 to take their Social Security benefits. This is the case even though 72 percent of them are aware their payments could be higher if they waited.

Why Are So Many People Willing to Give Up More Income?

Many of the survey participants – roughly 44 percent – said they worry about Social Security running out of funds. Their fears may not be entirely unfounded. The Social Security program has served as a safety net for millions of retirees, providing monthly benefits since 1940. However, based on some projections, timely payments may not be possible beyond 2037.

Another 36 percent of the respondents said they would take benefits earlier because they need the money sooner.

These fears, said Deb Boyden, head of US defined contribution at Schroders, reflect “a crisis of confidence in the Social Security system.”

“Fear about the stability of Social Security has people walking away from money that could improve their quality of life in retirement,” she said.

Other Key Findings

• Nearly half of all survey respondents (49 percent) acknowledged that they do not have any strategies in place for retirement income.

• Less than a quarter (24 percent) of those aged 60 to 67 who are still in the workforce said they believe they’ve accumulated sufficient retirement savings.

• Among respondents aged 45 and older, 69 percent say they fret over money daily – on average, 1.6 hours every day. More than half of this same group (53 percent) said they worry that stress over finances will have a negative impact on their overall health.
   
• Retirees who’d worked with a financial planner had higher average monthly incomes than those who had not sought out the help of an advisor ($5,075 per month versus $3,000 per month). Those who had set up a formal financial plan received nearly twice more per month on average in retirement – about $5,810.

Find more information on the survey results online.

Are You Missing Out on Benefits? Identify the Programs Available to Seniors Like You

Older adults have access to hundreds of federal and state benefits programs. Many retirees meet the requirements for these aids, yet do not know they are eligible and miss opportunities to receive assistance. Others can feel overwhelmed by complex application processes.

BenefitsCheckUp, the National Council on Aging’s online resource, helps elders identify the federal and state assistance programs for which they are qualified. The database is free to access, and the National Council on Aging ensures personal information people enter into the website remains confidential.

The resource provides older people not only with individualized reports of the assistance programs that cover them, but also the details they may need on each program before applying, including contact information for the agencies administering the assistance.

How to Obtain an Eligibility Results Report

To get personalized Eligibility Results detailing the benefits programs to which you may apply, enter your information into the database on the BenefitsCheckUp website, starting with your ZIP code. Then select the programs that interest you, which offer support on any number of services, including:

• Health care and medication
• Food and nutrition
• Housing and utilities
• Aging in place and in-home care
• Income
• Disability services
• Long-term care, such as skilled nursing facilities
• Discounts and activities
• Tax help
• Crisis, legal, and general assistance
• Veterans’ programs

Once you enter details such as your date of birth and marital status, BenefitsCheckUp generates a report outlining the specific programs accessible to you, and identifies what other information each program requires.

The Eligibility Results reports have several user-friendly features:

• If you make errors filling in details or want to provide additional information, the website allows you to go back and revise your answers.
• After the website creates an individualized Eligibility Results report, you can save it as a PDF and email it to yourself or a loved one.

Family and Caregivers Can Use BenefitsCheckUp to Assist Their Loved Ones

Family members or caregivers of older adults can also use BenefitsCheckUp to help their loved ones learn about benefits programs. They can enter an individual’s information into the website on their behalf and get a report, which they can use to support their loved ones in applying for state or federal benefits.

This easy-to-use resource can help older adults and their families alleviate the stress associated with applying to state and federal benefits programs. Visit the BenefitsCheckUp website to use the tool.

Should seniors retire early under the coronavirus crisis?

When the IRS Speaks, Retirees Need to Listen

“Workers aren’t the only ones who need to double-check that they’re withholding sufficient taxes. The IRS is warning retirees to ensure they're paying enough federal income tax.”

The IRS embarked on a big awareness campaign since the summer, telling taxpayers they should review and update their withholding numbers at work to ensure that they are paying enough federal income tax. But they’re not the only ones who should be checking their numbers, reports CNBC in the article “The IRS is warning retirees of this impending surprise tax.” Retirees who fail to update withholding from pensions or annuities may be in for a surprise, and it won’t be a good one.

It’s easier to say people should do this, than for them to do it, however.

Once people leave the workplace, they start drawing down income from several different sources. That usually means Social Security, IRAs, pensions and annuities.

While they were working, they didn’t have to think about income taxes, unless they were self-employed. Their payroll company or HR department took care of that.

Now, they must pay estimated taxes every quarter to the IRS.

There are two issues: making sure you remember to pay the tax on a timely basis and making sure that you pay the correct account. Some accounting firms send their clients reminders.  However, that doesn’t always do the job.

How can you make this easier?

There are new withholding tables from the IRS. Speak with your accountant. Make sure you have enough money set aside for quarterly tax payments.

If you’re single and your AGI (Adjusted Gross Income) plus nontaxable interest and half of your Social Security benefits are more than $34,000 (or $44,000, if you’re married), as much as 85% of your Social Security benefits could be taxed. If that seems like a lot, you’re right.

One alternative: use the IRS Form W-4V to withhold a flat rate from each check. Depending on your situation, you can withhold 7%, 10%, 12% or 22%.

If pension or annuity payments are an income source, you can also have taxes withheld from your income, using IRS Form W-4P, and chose the number of allowances you want to claim.

Work with your accountant to get a clear picture of your tax liability and do that now. If you want to avoid a nasty tax surprise in the spring, get it all done well before the end of 2018. You must know what you will need to pay. Especially for new retirees, it’s not easy to figure it out.

Reference: CNBC (Sep. 12, 2018) “The IRS is warning retirees of this impending surprise tax”