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Seniors nationwide are on the front lines of the fight to raise the debt ceiling, because if the federal government can’t make a June 2 payment slated for Social Security recipients, the oldest beneficiaries — those over 88 — and people with disabilities will be the first to suffer.
Roughly $98 billion worth of benefits, including Medicare, Medicaid, and military and civil retirement payments, are scheduled to go out in the first two days of June, according to an analysis by the Bipartisan Policy Center.
Representatives from the White House and House Republicans continued talks on Wednesday aimed at raising the debt ceiling, before the government risks defaulting on debts owed, which could happen as soon as June 1.
The timing of an early June default threatens to hurt the country’s oldest and poorest Social Security recipients, said Kathleen Romig, director of Social Security and disability policy at the Center on Budget and Policy Priorities.
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Social Security benefits are distributed four times a month, but the earliest round of payments go to retirees older than 88 years, as well as people with disabilities and seniors with especially low incomes — and less than $2,000 in assets — who are eligible for Supplemental Security Income (SSI). “There’s no fallback if these checks are late,” Romig said. “These are people who are literally not allowed to have emergency savings.”
If the U.S. defaults, will it miss Medicare payments? What about Social Security? See what’s at risk.
Among them is Nora Jean Stone, 74, who says she has enough socked away to last a month if her $1,153 worth of SSI and Social Security payments doesn’t show up next week.
She and her son, who is disabled, share a one-bedroom rent-controlled apartment in San Francisco and rely on a combination of Medicaid, Medicare and food assistance to make ends meet. Being unable to pay rent, she says, could cost them her home of 36 years.
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“Being poor, you’re always walking on eggshells,” said Stone, who worked for years as an administrative assistant and office manager at tech firms including AOL. “There are constantly unnecessary obstacles in your way, and now the debt ceiling is one more of them.”
Even a week-long holdup, economists say, could be devastating for the roughly 27 million Americans who rely on Social Security for most of their income. Food insecurity and poverty rates will almost certainly rise, and people will probably forgo medical treatments, as families struggle to make do without necessities.
“It’s going to cause a huge amount of hardship if Social Security checks are delayed at all,” said Alicia Munnell, director of the Center for Retirement Research at Boston College and a former assistant Treasury secretary. “When you’re living in a cash-strapped situation, timing really makes a lot of difference. People are waiting for their checks to buy groceries, to fill prescriptions. They get to the end of the month and are out of cash.”
Fewer hot showers, less meat: How retirees on fixed incomes are dealing with inflation
In interviews with more than a dozen older Americans who receive federal benefits, nearly all said a delayed payment would have immediate consequences on their ability to pay for housing, utilities and groceries. Many were mapping out worst-case scenarios, making plans to do without blood pressure medication or borrow against their homes or return to work, though the prospect of rejoining the labor force after years away made them anxious. Several said they had become fixated on lawmakers’ every move, looking for hints into how this months-long skirmish might eventually be resolved.
“We worked hard our entire lives for Social Security, and we earned these benefits,” said Jim Massa, 64, a retired oceanographer in Fairbanks, Alaska. “To say suddenly, ‘You can’t have this money that you’ve earned, that you’re living on’ — they’re playing with people’s lives.”
As funds run short, Treasury asks agencies if payments can be made later
Retirees are particularly susceptible to the whims of the economy because they often rely on fixed incomes and limited savings that have to last for indeterminate periods of time. In addition, their savings may be tied up in the stock market or government bonds, both of which are projected to take large hits if the federal government can’t pay its bills on time.
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“A lot of older Americans have very little, if any, savings,” said Olivia Mitchell, director of the Boettner Center for Pensions and Retirement Research at the University of Pennsylvania’s Wharton School. “And the savings they do have is often illiquid — they might have equity in their homes, for example, but it might not be easy for them to dip into. We could be facing tough times ahead.”
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What happens if the U.S doesn’t raise the debt ceiling?
If U.S. debt ceiling isn’t raised by deadline, what would default mean? 7 outcomes that experts worry about most.
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In Santa Maria, Calif., Melissa Fields says any disruption to her Social Security benefits next week would be crushing. The 63-year-old, who has autism, relies on $1,388 in monthly payments, as well as Medicare and Medicaid, to cover rent, buy groceries and pay for daily kidney dialysis.
Even so, she says the benefits have hardly been enough to keep up with rising costs. She has about $12,000 in debt and has been struggling to make minimum credit card payments.
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“It feels like I’m living on the edge of a cliff,” she said. “I’m so scared. I’ve been disabled my whole life and have always depended on my Social Security, my Medicaid, my Medicare. To threaten to take that away is unfair, it’s cruel. The prospect [of] … being suddenly without money or health care is too much to bear.”
The risks of a U.S. default are vast and wide-ranging. If Congress and President Biden don’t reach a deal in the next week, the government will run out of money to cover its expenses, causing unprecedented harm to the economy. Stocks, bonds and the U.S. dollar would plummet, contributing to nearly 8 million job losses and wiping out an estimated $10 trillion in household wealth, according to estimates from Moody’s Analytics.
Small businesses are beginning to panic about a government default
The blow to Social Security — which, at $1 trillion a year, accounts for 16 percent of the country’s annual spending — is expected to be particularly debilitating. An estimated 67 million people rely on Social Security benefits each month, making it the largest federal benefits program.
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Social Security payment dates are typically based on a recipient’s birthdate — for example, people born between the 1st and 10th of any given month receive their checks on the second Wednesday of each month. The exception, though, is older Americans who have been tapping into Social Security since 1997 — making them at least 88 years old — or those who receive SSI or disability benefits.
Republicans in Congress have maintained that they don’t want to cut Social Security benefits, though at least one recent budget blueprint calls for raising the eligibility age for full retirement from 67 to 70 to account for longer life expectancies. The GOP has also proposed a host of cuts and additional work requirements for other federal benefits, such as Medicaid and food stamps, that experts say would have an outsize impact on the country’s seniors.
“Older people, especially those who do not have savings, are very vulnerable to food insecurity and poverty,” said Sophie Mitra, an economics professor at Fordham University. “They have fewer resources than working-age people and may have chronic health conditions that may strain their budgets or limit their mobility. Social Security benefits are really key for their economic security.”
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Holly DiBello spent decades working for small medical practices in Scottsdale, Ariz. But now that she’s retired, she relies on monthly Social Security and Medicare checks to cover her biggest expenses, including utilities, groceries and her husband’s $6,000-a-month hospice care.
“I’m about to turn 70 and here I am saying, ‘I guess I’ve got to go back to work,’” she said. “I don’t know what else to do. Just my husband’s medication — I have to pay cash, out of pocket, every two weeks — will take up every cent I have left.”
Michelle Singletary: Debt ceiling standoff is as much about managing fear as finances
Experts say it’s unclear exactly how the government would prioritize payments in the case of a U.S. default, which has never happened before. When asked about the nature and timing of potential delays, a spokesman for the Social Security Administration directed questions to the Treasury Department. The Treasury Department did not respond to requests seeking comment.
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“There’s tremendous uncertainty, of course,” said Romig, of the Center on Budget and Policy Priorities, who previously worked for the Social Security Administration. “As soon as we hit that so-called X-date, we’re going to be in opposition to dozens, maybe hundreds, of laws — including the Social Security Act, which says payments must be made on time in full.”
Anthony Gray received his first retirement check this month. But given the country’s debt ceiling debacle, he fears it could be his last for a while.
Gray, who left his computer programming job in 2019 after a skin cancer diagnosis, says he has put his life on hold, in case his next $1,388 Social Security payment doesn’t arrive as expected in mid-June. He has stopped buying eggs, is letting newspaper subscriptions lapse and is relying more on $3 subsidized lunches at a local senior center near Albany, N.Y.
“I’m not spending on anything I don’t absolutely have to spend on in case a government default means there’s no check,” the 62-year-old said. “I have to assume the worst, out of prudence, so maybe I can set aside enough to cover June’s bills. But what if this goes on for two months or three months? Then I don’t know.”
FAQs
U.S. debt default could hit Social Security payments first? ›
Seniors nationwide are on the front lines of the fight to raise the debt ceiling, because if the federal government can't make a June 2 payment slated for Social Security recipients, the oldest beneficiaries — those over 88 — and people with disabilities will be the first to suffer.
Are Social Security checks going up the first of the year? ›Social Security benefits will increase by 8.7 percent beginning with the December 2022 benefits, which are payable in January 2023. Federal SSI payment levels will also increase by 8.7 percent effective for payments made for January 2023.
Does the debt ceiling affect Social Security payments? ›If the US is not able to pay all its bills for the first time ever, senior citizens could quickly feel the pain.
Which president borrowed from Social Security? ›“Next time a Republican tells you that 'Social Security is broke,' remind them that Pres. Bush 'borrowed' $1.37 trillion of Social Security surplus revenue to pay for his tax cuts for the rich and his war in Iraq and never paid it back”.
What happens to Social Security if the government shuts down? ›Government shutdowns don't hit payments for Social Security, Medicare or Medicaid, since Congress places those programs in the mandatory category that's exempt from the annual government funding process and therefore predominantly exempt from funding lapses.
How do you get the $16728 Social Security bonus? ›To acquire the full amount, you need to maximize your working life and begin collecting your check until age 70. Another way to maximize your check is by asking for a raise every two or three years. Moving companies throughout your career is another way to prove your worth, and generate more money.
What changes are coming to Social Security in 2023? ›Social Security recipients will get an 8.7% raise for 2023, compared with the 5.9% increase that beneficiaries received in 2022. Maximum earnings subject to the Social Security tax also went up, from $147,000 to $160,200.
Can creditors go after Social Security benefits? ›Generally, Social Security benefits are exempt from execution, levy, attachment, garnishment, or other legal process, or from the operation of any bankruptcy or insolvency law.
Can debt be taken from Social Security? ›While Social Security income can not be garnished by a credit card company to pay a debt, there is one creditor that can garnish it: the U.S. Department of Treasury. Officially called the Treasury Offset Program, Social Security and other federal retirement benefits can be garnished if you owe: Unpaid federal taxes.
Can debt collectors get your Social Security? ›Generally no, debt collectors can't take your Social Security or VA benefits directly out of your bank account or prepaid card. After a debt collector sues you for the debt and wins a judgment, it can get a court order for your bank or credit union to turn over money from your account or prepaid card.
What did Ronald Reagan do to Social Security? ›
In 1981, Reagan ordered the Social Security Administration (SSA) to tighten up enforcement of the Disability Amendments Act of 1980 created by then President Jimmy Carter https://www.ssa.gov/policy/docs/ssb/v44n4/v44n4p14.pdf , which resulted in more than a million disability beneficiaries having their benefits stopped ...
Has Congress stolen from Social Security? ›Every single dollar in excess revenue collected by Social Security is accounted for by these bonds and certificates of indebtedness. Nothing has been stolen, and not a cent is missing. What's more, Social Security's investment holdings (link opens new window) update each month.
How much money has the US government borrowed from Social Security? ›The Government Has Borrowed $1.7 Trillion From The Social Security Trust Fund. The government has borrowed the total value of the Trust Fund to pay for other government spending.
Why would Social Security be stopped? ›The most common reason for someone to lose SSI benefits is having too much income—whether through working or some other source.
What happens if we hit the debt ceiling? ›Potential repercussions of reaching the ceiling include a downgrade by credit rating agencies, increased borrowing costs for businesses and homeowners alike, and a dropoff in consumer confidence that could shock the United States' financial market and tip its economy—and the world's—into immediate recession.
Will the government raise Social Security? ›Social Security benefits and Supplemental Security Income (SSI) payments will increase by 8.7% in 2023. This is the annual cost-of-living adjustment (COLA) required by law. The increase will begin with benefits that Social Security beneficiaries receive in January 2023.
What is the Social Security loophole? ›The Restricted Application Loophole
Every year you delay, your monthly retirement benefit increases (until age 70). One Social Security loophole allowed married individuals to begin receiving a spousal benefit at full retirement age, while letting their own retirement benefit grow.
You must have worked and paid Social Security taxes in five of the last 10 years. If you also get a pension from a job where you didn't pay Social Security taxes (e.g., a civil service or teacher's pension), your Social Security benefit might be reduced.
What is the highest Social Security payment? ›In 2023, the average senior on Social Security collects $1,827 a month. But you may be eligible for a lot more money than that. In fact, some seniors this year are looking at a monthly benefit of $4,555, which is the maximum Social Security will pay. Here's how to score a benefit that high.
What will replace Social Security? ›In the proposals presented to the Commission, the use of retirement bonds--and annuities based on bond accumulations- would also replace the entire benefit structure of Social Security for the future.
At what age is Social Security no longer taxed? ›
Social Security benefits may or may not be taxed after 62, depending in large part on other income earned. Those only receiving Social Security benefits do not have to pay federal income taxes.
Is there a bill in Congress to stop taxing Social Security? ›4453 - 117th Congress (2021-2022): No Tax on Social Security Act of 2021 | Congress.gov | Library of Congress.
Does Social Security watch your bank account? ›The Social Security Administration can only check your bank accounts if you have allowed them to do so. For those receiving Supplemental Security Income (SSI), the SSA can check your bank account because they were given permission.
Why seniors should not worry about old debts? ›Seniors enjoy protection from collection
Elders in California have a raft of legal protections from creditors. Exemption laws, pension law, and the Social Security Act often make it hard for creditors to seize the assets of elders, even to pay legitimate debts.
Bank accounts solely for government benefits
Federal law ensures that creditors cannot touch certain federal benefits, such as Social Security funds and veterans' benefits. If you're receiving these benefits, they would not be subject to garnishment.
SSA limits the value of resources you own to no more than $2,000. The resource limit for a couple is only slightly more at $3,000. Resources are any assets that can be converted into cash, including bank accounts. However, some assets you own may not affect eligibility for the program.
What is the 11 word phrase to stop debt collectors? ›If you are struggling with debt and debt collectors, Farmer & Morris Law, PLLC can help. As soon as you use the 11-word phrase “please cease and desist all calls and contact with me immediately” to stop the harassment, call us for a free consultation about what you can do to resolve your debt problems for good.
What percentage of Social Security can be garnished? ›If you owe federal taxes, 15 percent of your Social Security check can be used to pay your debt, no matter how much money is left.
What happens to debt if you become disabled? ›You can be sued for credit card debt when on disability, but the end result is that they will not be able to actually collect on the judgment if your income is protected. The only downside is that you will still have a judgment placed on you, and it may hurt your credit.
How do you open a bank account that no creditor can touch? ›There are four ways to open a bank account that no creditor can touch: (1) use an exempt bank account, (2) establish a bank account in a state that prohibits garnishments, (3) open an offshore bank account, or (4) maintain a wage or government benefits account.
Which president wanted to privatize Social Security? ›
February 2005 – Republican President George W. Bush outlined a major initiative to reform Social Security which included partial privatization of the system, personal Social Security accounts, and options to permit Americans to divert a portion of their Social Security tax (FICA) into secured investments.
Where did the Social Security money go? ›Any unused money goes to the Social Security trust funds, not a personal account with your name on it. Many people think of Social Security as just a retirement program. Most of the people receiving benefits are retired, but others receive benefits because they're: Someone with a qualifying disability.
What was life expectancy when Social Security started? ›Life expectancy at birth in 1930 was indeed only 58 for men and 62 for women, and the retirement age was 65. But life expectancy at birth in the early decades of the 20th century was low due mainly to high infant mortality, and someone who died as a child would never have worked and paid into Social Security.
Was Social Security supposed to be temporary? ›FDR, and the members of the CES, believed that old-age assistance was a temporary stop-gap which would eventually completely disappear as social insurance became established.
Who has the first Social Security number? ›This particular record, (055-09-0001) belonged to John D. Sweeney, Jr., age 23, of New Rochelle, New York. The next day, newspapers around the country announced that Sweeney had been issued the first SSN.
Why is Social Security taxed twice? ›It's not double taxation because the funds you collect don't come directly from your taxes. Your taxes are paying for today's beneficiaries, so the benefits you receive will be from someone else's payroll taxes. You have to think about your payroll taxes as a premium into a retirement account.
How much does the US owe the Social Security trust fund? ›As of December 2022 (estimated), the intragovernmental debt was $6.18 trillion of the $31.4 trillion national debt. Of this $6.18 trillion, $2.7 trillion is an obligation to the Social Security Administration.
Will Social Security run out by 2035? ›Essentially, yes, Social Security's reserve funds will “run out,” but the majority of benefits will still be covered by taxpayers. And if Congress adjusts the structure of the program by 2035 through tax increases, benefit reductions or some other method, Social Security may be able to continue providing full benefits.
Why did the government borrow money from Social Security? ›Money that the federal government borrows, whether from investors or from Social Security, is used to finance the ongoing operations of the government in the same way that money deposited in a bank is used to finance spending by consumers and businesses.
Will Social Security exist in 30 years? ›The Future of Social Security
Social Security may look drastically different in the next few decades, especially since the Social Security Administration's 2023 Trustees Report estimates that the Old-Age and Survivors Insurance (OASI) Trust Fund, which pays out Social Security benefits, will be depleted by 2033.
How do I get the $16728 Social Security bonus? ›
To acquire the full amount, you need to maximize your working life and begin collecting your check until age 70. Another way to maximize your check is by asking for a raise every two or three years. Moving companies throughout your career is another way to prove your worth, and generate more money.
Will Social Security not be able to pay full benefits? ›Social Security will not be able to pay full benefits in 2034 if Congress doesn't act. Americans' Social Security checks will get a lot smaller in 2034 if lawmakers don't act to address the pending shortfall, according to an annual report released Friday by the Social Security trustees.
Can us ever pay off debt? ›In modern history, the U.S. has never defaulted on its debt. The debt ceiling is the self-imposed limit on how much debt Congress allows the federal government to have. If Congress does not raise or suspend the debt ceiling, the U.S. could default on its debt, which would also impact financial markets and the economy.
Who is United States in debt to? ›Investors in Japan and China hold significant shares of U.S. public debt. Together, as of September 2022, they accounted for nearly $2 trillion, or about 8 percent of DHBP. While China's holdings of U.S. debt have declined over the past decade, Japan has slightly increased their purchases of U.S. Treasury securities.
Why does the US have so much debt? ›America's debt has risen massively since the beginning of the 21st century, as "politicians from both parties have made a habit of borrowing money to finance wars, tax cuts, expanded federal spending, care for baby boomers, and emergency measures to help the nation endure two debilitating recessions," writes Jim ...
How much will Social Security pay in 2023? ›This increase amounts to more than $140 for the average retired worker, according to estimates released by the SSA. It raises their total benefits to $1,827 per month in 2023. Couples will experience an average benefits increase of $238 to $2,753 per month.
How much will SSI check be in 2023? ›Generally, the maximum Federal SSI benefit amount changes yearly. SSI benefits increased in 2023 because there was an increase in the Consumer Price Index from the third quarter of 2021 to the third quarter of 2022. Effective January 1, 2023 the Federal benefit rate is $914 for an individual and $1,371 for a couple.
How much will the SSI checks be in 2023? ›Generally, the maximum Federal SSI benefit amount changes yearly. SSI benefits increased in 2023 because there was an increase in the Consumer Price Index from the third quarter of 2021 to the third quarter of 2022. Effective January 1, 2023 the Federal benefit rate is $914 for an individual and $1,371 for a couple.
How much will SSI pay in January 2023? ›The latest such increase, 8.7 percent, becomes effective January 2023. The monthly maximum Federal amounts for 2023 are $914 for an eligible individual, $1,371 for an eligible individual with an eligible spouse, and $458 for an essential person.
What is the cost-of-living increase for 2023? ›While the 2022 COLA adjustment was 5.9%, government inflation data showed costs grew at a faster pace for much of last year. Now, the 8.7% COLA for 2023 is outpacing current inflation, with a 5.8% increase over the past 12 months for the consumer price index for urban wage earners and clerical workers, or CPI-W.
What is the Social Security 5 year rule? ›
You must have worked and paid Social Security taxes in five of the last 10 years. • If you also get a pension from a job where you didn't pay Social Security taxes (e.g., a civil service or teacher's pension), your Social Security benefit might be reduced.
What is the increase for 2024 Social Security? ›“The 2024 COLA could be around 3.1%,” said Mary Johnson, TSCL's Social Security and Medicare policy analyst in a briefing document released this month. At the end of 2021, about 70 million U.S.
What state pays the most in Social Security? ›- Total Social Security Received: $9.34 billion.
- Total Number of Recipients: 6,166,205.
- Total Social Security Received: $162.82 million.
- Total Number of Recipients: 110,006.
Comparing the maximum SSI benefit to the cost of living in each state, SSI payments are enough to cover less than a third of living expenses. There are only 15 states where annual SSI benefits are worth at least 30% of the living wage, with South Dakota being the highest at just under 33%.
Will SSI get a 4th stimulus check? ›SSI and veterans will get this payment in the same way they got their first stimulus check.
What is the maximum Social Security benefit for a single person? ›The maximum Social Security benefit in 2023 is $3,627 at full retirement age. It's $4,555 per month if retiring at age 70 and $2,572 if retiring at age 62.
What is the max Social Security benefit? ›3 steps to claiming the $4,555 max monthly Social Security benefit.
Will cost-of-living go down in 2023? ›Prices are currently coming down in some markets, and the national median price was ever-so-slightly lower in February 2023 than it was in 2022, but experts do not expect dramatic drops. In many areas where prices are falling, the declines have not significantly improved affordability.
How do I calculate my COLA increase for 2023? ›To determine the COLA, the SSA compares the average CPI-W for July, August and September to the figure for that same period the year before. For example, the CPI-W in July 2021 was up 6 percent from July 2020. The year-on-year increases in August and September 2021 were 5.8 percent and 5.9 percent, respectively.