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House just voted yes to increase Social Security for some beneficiaries

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A bipartisan bill to change Social Security benefit rules for pensioners passed in the House of Representatives on Tuesday, with 327 lawmakers voting to support the measure.

Now, the proposal heads to the Senate, where the chamber’s version of the bill has 62 co-sponsors, “surpassing the majority needed to pass the bill on the U.S. Senate floor and send it to the president’s desk to be signed into law,” Reps. Abigail Spanberger, D-Virginia, and Garret Graves, R-Louisiana, co-leaders of the bill, said in a joint statement.

The proposal — called the Social Security Fairness Act — would repeal rules that reduce Social Security benefits for individuals who receive pension benefits from state or local governments.

It would eliminate the windfall elimination provision, or WEP, that reduces Social Security benefits for individuals who worked in jobs where they did not pay Social Security payroll taxes and now receive pension or disability benefits from those employers. About 3% of all Social Security beneficiaries — about 2.1 million people — were affected by the WEP as of December 2023, according to the Congressional Research Service.

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The bill would also eliminate the government pension offset, or GPO, which reduces Social Security benefits for spouses, widows and widowers who also receive pension checks. As of last December, about 1% of all Social Security beneficiaries — or 745,679 individuals — were affected by the GPO, according to the Congressional Research Service.

These rules, which have been in effect for decades, reduce the incomes of certain retired police officers, teachers, firefighters and other public servants, Graves said during a Tuesday speech on the House floor.

“This has been 40 years of treating people differently, discriminating against a certain set of workers,” Graves said.

“They’re not people that are overpaid; they’re not people that are underworked,” he said.

Supporters call bill a ‘step in the right direction’

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On Tuesday, Larson voted against the Social Security Fairness Act, as well as another bill, the Equal Treatment of Public Servants Act. The latter bill would use a new formula for Social Security retirement and disability benefits for pensioners rather than eliminate the WEP. It would not change the GPO.

The bill, which was proposed by Rep. Jodey Arrington, R-Texas, failed when it was brought up for a vote.

“I could not vote for the bills on the floor tonight because they are not paid for and therefore put Americans’ hard-earned benefits at risk,” Larson said in a statement. “It would hurt most deeply the five million of our fellow Americans who receive below poverty checks, and almost half of all Social Security recipients who rely on their earned benefits for the majority of their income.”

Critics say the bill will weaken Social Security

The Social Security Fairness Act would add an estimated $196 billion to deficits over the next decade, the Congressional Budget Office has estimated. It would also move Social Security’s trust fund depletion dates closer by an estimated six months, according to the Committee for a Responsible Federal Budget.

“The long-term solvency of Social Security is an issue that Congress must address,” Spanberger said on the House floor on Tuesday.

“But that is a separate issue from allowing Americans who did their part, who contributed their earnings, for them to retire with dignity,” she said.

However, critics say Social Security’s funding woes should be a priority for Congress now. The program’s actuaries project the trust fund used to pay retirement benefits may be depleted in 2033, at which point 79% of benefits will be payable.

“This is not the right policy,” said Romina Boccia, director of budget and entitlement policy at the Cato Institute. “It’s what special interests were pushing, and politicians are responsive to their demands.”

Though the alternative bill proposed by Arrington would not address the GPO, it would provide a “fairer formula” for the WEP, Boccia said. However, broader changes are needed to shore up the program’s finances.

“We should reform Social Security so that it provides basic income security to the most vulnerable Americans in old age without adding to the debt or tax burden that younger workers face,” Boccia said.

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Personal Finance

Social Security to send notices revealing size of 2025 benefit checks

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A new 2.5% cost-of-living adjustment

In 2025, retirement benefits will increase by about $50 per month, on average, according to the Social Security Administration.

That’s as all beneficiaries will see a 2.5% benefit increase due to the annual cost-of-living adjustment.

Notably, the benefit boost for 2025 will be the lowest since 2021. As the pace of inflation has subsided, the cost-of-living adjustment has come down with it, since the Social Security Administration uses government inflation data to calculate the annual change.

Beneficiaries saw the highest increases in four decades in 2023, when the COLA was 8.7%, and in 2022, when benefits went up by 5.9%. However, the annual COLA started to come down in 2024, with a 3.2% annual adjustment.

“Although price increases have moderated, it’s not as though inflation is over,” said Joe Elsasser, a certified financial planner and president of Covisum, a Social Security claiming software company.  

If the pace of inflation picks up again, the annual COLA could go up again, he said.

Monthly Medicare Part B premiums to go up

Income changes may prompt higher taxes

Social Security beneficiaries may request to have withholding for federal taxes from their benefit payments.

Beneficiaries may want to consider whether they want to adjust those withholdings, particularly if they anticipate more of their benefits could be taxed, according to Jim Blair, vice president of Premier Social Security Consulting.

Social Security benefits are taxed on a formula called combined income — the sum of adjusted gross income, nontaxable interest and half of Social Security benefits. Beneficiaries may pay no taxes on their benefits, if their combined income is low enough, or up to 50% or 85% of their benefits may be subject to federal taxes if their combined incomes are above certain thresholds.

“What we’ve seen with clients is kind of a surge in other income that has caused more of their Social Security to be taxed,” said CFP Brian Vosberg, president of Vosberg Wealth Management in Glendora, California.

Maximizing your Social Security benefits

For example, retirees who have $200,000 in money market accounts or certificates of deposit are seeing higher interest payments on that sum after the Federal Reserve’s string of rate hikes in recent years. That interest income may require beneficiaries to pay a higher federal tax rate on their benefits, Vosberg said.

Proactive tax planning can help alleviate that situation, Vosberg said. Strategies such as buying an annuity that lets that interest grow tax deferred or reducing income from other areas, such as IRA withdrawals, can help minimize the tax bite, he said.

Retirees should also take note if their incomes have meaningfully changed in the past couple of years, according to Blair. If that’s the case, their monthly Medicare Part B premium rate may no longer be accurate. Beneficiaries can notify the Social Security Administration of life-changing events that affect their incomes and Medicare premiums by filling out a Form SSA-44.  

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Thanksgiving meals may be cheaper in 2024 as turkey prices drop

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Filadendron | E+ | Getty Images

Thanksgiving is a time to gather with loved ones, to show gratitude for life’s abundance — and, of course, to eat.

And when it comes to Thanksgiving food, it seems Americans are getting relief on their grocery bills this year following a few years of escalating costs.

A “classic” Thanksgiving feast for a party of 10 will cost $58.08 in 2024, on average — down 5% from 2023 and down 9% from 2022, according to the American Farm Bureau Federation, a trade group for farmers and ranchers.

Its analysis includes turkey, cubed stuffing, sweet potatoes, dinner rolls, frozen peas, fresh cranberries, celery, carrots, pumpkin pie mix and crusts, whipping cream and whole milk.

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Prices for this food basket were at a record high in 2022, at $64.05, the Farm Bureau said.

Households that add ham, russet potatoes and frozen green beans into the mix would pay $77.34 in 2024, on average — an 8% decrease from 2023, the Farm Bureau said.

The annual decline in prices will be welcome news to many households: Nearly half, 44%, of people hosting Thanksgiving this year are concerned about the cost of the event, according to a recent Deloitte survey.

The decrease is largely due to various supply-and-demand dynamics driving down prices for key staples — turkey, most importantly — and an overarching decline in U.S. food inflation, according to economists.

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“Food inflation has been pretty tame,” said Robin Wenzel, head of the Wells Fargo Agri-Food Institute. “You’re seeing some good relief there.”

That said, a classic Thanksgiving meal is still 19% pricier than it was in 2019, according to the Farm Bureau.

“Declines don’t really erase the dramatic increases we had,” said Bernt Nelson, a Farm Bureau economist.

Turkey has been a ‘curious item’

Monty Rakusen | Digitalvision | Getty Images

Largely, that’s because of the impact of bird flu, a lethal and contagious disease among birds that has contributed to the deaths of about 14 million turkeys since 2022, he said.

Lower supply would tend to raise prices, all else equal. But consumer demand has decreased as well. To that point, turkey consumption per capita has fallen by about one pound this year, he said.

The aggregate impact has been lower turkey prices.

Weather and labor impacts

Meanwhile, prices fell notably — by 14% — for whole milk, a staple ingredient in pie and other recipes, Nelson said.

That’s largely attributable to “favorable” weather conditions in the U.S. for dairy cattle — both in terms of their overall wellbeing and for crops they eat — thereby helping boost milk production, Nelson said.

Of course, not everything is cheaper.

Prices for processed products like dinner rolls and cubed stuffing increased more than 8% from 2023, for example, the Farm Bureau said. That’s primarily attributable to non-food-related inflation such as labor costs, pushing up prices “for partners across the food supply chain,” the group said in its analysis.

Food inflation has been pretty tame. You’re seeing some good relief there.

Robin Wenzel

Wells Fargo Agri-Food Institute

Aside from labor costs, there were many contributors to fast-rising grocery prices during the pandemic era.

For example, in 2022, food prices grew faster than any year since 1979, partly due to a bird-flu outbreak that affected egg and poultry prices, while Russia’s invasion of Ukraine “compounded other economy-wide inflationary pressures such as high energy costs,” according to the USDA.

Higher costs for energy such as gasoline and diesel fuel translate into higher prices across the food supply chain, such as to distribute groceries to store shelves, experts said.

“Food price growth slowed in 2023 as wholesale food prices and these other inflationary factors eased from 2022,” the USDA said, and it has declined further in 2024.

How to trim Thanksgiving costs

Consumers often pay a premium for name-brand items, but that’s not true in all cases this year.

For example, name-brand cranberries are cheaper than the store brand, on average, Wenzel said.

“When shopping this year, it really comes back to doing a little bit of research,” Wenzel said.     

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Personal Finance

Could Trump reinstate forgiven student debt? Here’s what experts say

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Mementojpeg | Moment | Getty Images

Since President Joe Biden took office, the Education Department has canceled the federal student loans of nearly 5 million people, totaling $175 billion in relief, according to the White House.

It has done so mostly by improving existing student loan relief programs that had long been plagued by problems, including the Public Service Loan Forgiveness initiative and income-driven repayment plans.

Those borrowers should be in the clear, experts say.

“Any regulatory changes must be prospective only,” meaning that eliminations to loan forgiveness programs would only impact new borrowers, explained Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit that helps borrowers navigate the repayment of their debt.

“They aren’t allowed to change regulations retroactively,” she added.

For that reason, even borrowers who have been pursuing forgiveness under an income-driven repayment plan or a program like PSLF, but have not yet received that relief, may be safe.

The terms of a loan, which are spelled out in the Master Promissory Note federal student loan borrowers sign when they take out the debt, can’t be change in the middle of repayment, experts said.

In June, U.S. District Judge Daniel Crabtree in Wichita, Kansas, described student loan forgiveness as having an “irreversible impact,” in his decision to block one of the Biden administration’s relief measures.

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The retraction of student loan forgiveness is incredibly rare, Kantrowitz writes in a recent article in The College Investor.

For example, in February, some borrowers saw their debts reinstated under the Public Service Loan Forgiveness program. Yet that only occurred because the debt cancellation was granted through an error, and the borrowers were not yet eligible for the relief.

“Don’t worry,” Kantrowitz said. “The president does not have the legal authority to reinstate forgiven loans.”

Still, borrowers should keep a record of the notices they’ve received about their forgiven debt, and any loan documents showing a $0 balance, Kantrowitz said.

In a new report, the Consumer Financial Protection Bureau cites, among the errors reported by student loan borrowers, “balance reinstatements,” in which a loan servicer tacks a loan balance back on to one’s account.

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