NEW YORK (AP) — Tens of millions of older Americans will see a major increase in benefits this January when a new cost-of-living adjustment (or COLA) is added to Social Security payments .
The Social Security Act was signed by President Franklin Delano Roosevelt in August of 1935. Taxes were collected for the first time in January 1937 and the first lump-sum payments were made that month. Regular ongoing monthly benefits began in January 1940.
When the Social Security trust fund is depleted, the government will still be able to pay 80% of scheduled benefits for an indefinite future, the report said, while Medicare will be able to pay closer to 90% of scheduled benefits. That means, if nothing changes, future generations can expect to see a 20% across the board reduction in payments, with a 10% reduction in Medicare coverage.
William Arnone, CEO of the National Academy of Social Insurance, does caution that “the two economic enemies of the trust fund are high inflation and low employment, meaning not only high unemployment but low wages.”In that context, a high cost-of-living adjustment can be “bad for the trust fund but great for the beneficiaries.
“Lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security,” the trustees of the fund wrote in the latest June report. “Taking action sooner rather than later will allow consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.”
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