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Warren's Social Security Plan: Increase Benefits, Raise Taxes On The Nation's Highest Earners
Elizabeth Warren has rolled out a plan to increase Social Security benefits for all current and future American retirees, while substantially boosting Social Security taxes on the nation's top earners.
The Massachusetts U.S. senator and Democratic presidential candidate says her plan would "provide the biggest and most progressive increase in Social Security benefits in nearly half a century."
According to a draft of the plan released by her campaign Thursday morning, Warren would do the following:
- Increase Social Security benefits immediately by $200 a month — $2,400 a year — for every current and future Social Security beneficiary.
- Update rules to further increase benefits for lower-income families, women, people with disabilities, public-sector workers and people of color.
- Finance these changes and extend the solvency of Social Security by nearly two decades by asking families with income in the top 2% of earners to contribute their "fair share" to the program.
Warren's proposal is her latest plan among many aimed at helping working Americans. She says reforming and updating Social Security is necessary because "it's getting harder to save enough for a decent retirement."
She argues that a generation of stagnant wages and rising costs for basics like housing, health care, education and child care have squeezed family budgets and forced millions of Americans to sacrifice saving for retirement.
"As a result, Social Security has become the main source of retirement income for most seniors," Warren says. "Yet typical Social Security benefits today are quite small. In 2019, the average Social Security beneficiary received $1,354 a month, or $16,248 a year."
According to Warren's analysis, for someone who worked their entire adult life at an average wage and retired this year at the age of 66, Social Security will replace just 41% of what they used to make — well short of the 70% many financial advisers recommend for a decent retirement.
The draft includes an independent analysis from Mark Zandi, chief economist of Moody's Analytics, who concludes that Warren's plan would lift an estimated 4.9 million seniors out of poverty, cutting the senior poverty rate by 68%. Zandi also concludes that the plan would produce "a much more progressive Social Security system" by raising contribution requirements only on very high earners and increasing average benefits by nearly 25% for those in the bottom half of the income distribution.
Social Security is funded by mandatory contributions authorized by the Federal Insurance Contributions Act, or FICA. The FICA contribution is 12.4% of wages up to an annual cap, with employers and employees splitting those contributions equally. This year's cap, which is adjusted each year based on national average wages, is $132,900.
To pay for her plan, Warren would require the country's richest Americans to kick substantially more money into the system. First, she would impose a 14.8% Social Security contribution requirement on individual wages above $250,000. Second, she would establish a new 14.8% Social Security contribution requirement on net investment income on individuals making more than $250,000 in annual income or families that make more than $400,000 a year. Warren says these new requirements would affect the top 2% of earners.
By tapping wealthy Americans, Warren is hoping to shore up funding of the nation's retirement system, which is expected to start running low on cash by 2035. At that time, if no action has been taken, the system will only be able to cover 80% of benefits, according to the latest projections by the Social Security Board of Trustees.
"My plan raises Social Security benefits across-the-board by $2,400 a year and extends the full solvency of the program for nearly another two decades," Warren says.
With her latest plan, Warren is hoping to set the agenda in the presidential contest over the future of Social Security. There has been little discussion or debate on the issue in the campaign so far. President Trump has repeatedly talked about protecting Social Security, but has yet to offer a concrete proposal to do so.
After Trump claimed that Democrats will "destroy your Social Security," congressional Democrats came together last September to create the Expand Social Security Caucus. Some of Warren's rivals vying for the Democratic presidential nomination, including Sens. Kamala Harris (D-Calif.), Bernie Sanders (I-Vt.) and Cory Booker (D-N.J.), support a bill to expand Social Security.
