Retirement: Social Security-related program needs a major overhaul, expert says

·4-min read

Social Security isn't the only federal retirement program that needs serious work, according to one expert. 

Supplemental Security Income (SSI) — designed for people with very low Social Security benefits or for those who don't even qualify for them — hasn't changed much since it was signed into law by President Nixon in the 1970s.

The program supplements Social Security benefits, which are earned through work. The maximum benefit tops out at $800 per month.

"Starting in 1972 and for every year since, SSI recipients can only keep $20 of their Social Security," Kathleen Romig, senior policy analyst at the Center on Budget and Policy Priorities (CBPP), said on Yahoo Finance Live recently (video above). "After that, their SSI benefit is reduced dollar for dollar. That's a big deal for a lot of people receiving SSI."

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John Buhagiar at Fenney Recreation Center in The Villages, Fla., March 15, 2020. REUTERS/Yana Paskova

That $20 hasn't increased for inflation since then. 

A majority of SSI recipients are people of color, particularly children and adults with disabilities. 

“By improving the Supplemental Security Income program, it's a way of trying to mitigate some of those labor force disparities that we see by race,” Romig said. “It's a way to help counteract some of the inequality that we see in all parts of our society.”

'All kinds of intrusive questions asked repeatedly over and over'

A major issue with the program is that it limits how much people can own in assets or have in their savings. (At the time it was established in 1972, 401(k)s and IRAs didn't exist.)

"We just weren't expecting people to save as much," Romig said.

Read more: 3 key factors to consider when planning for retirement

Individuals can hold a maximum of $2,000 in their savings, while couples can have only up to $3,000. Neither of these figures have been updated since 1989.

“If that had been increased just with inflation since 1972, it would be four times as high," Romig said. "Arguably, it should be increased even more now that we’re asking people to save more, especially for retirement.”

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The program also has additional rules that Romig described as "intrusive." For example, if someone is a recipient of disability benefits, they have a "continuing disability review" to ensure they continue meeting the medical eligibility requirements.

"They also have something a redetermination," Romig said, "which just makes sure that people continue to met those financial criteria."

Perhaps the "most complicated" rules, however, are the in-kind support and maintenance rules. This limits the amount of financial help an SSI recipient can get from family or friends. 

“That may be a bag of groceries, maybe a room to stay in,” Romig said. “And if they do, the value of their benefits is reduced dollar for dollar. In order to administer a rule like that, you have to ask people all the time ‘Are you getting a bag of groceries? Where do you live? Who do you live with?’ All kinds of intrusive questions asked repeatedly over and over.”

According to CBPP, less than 10% of recipients report receiving this kind of support, but every single SSI recipient is still asked repeatedly. There are no other federal programs that consider in-kind support when determining benefits. 

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A tourist gazes up towards the dome of the U.S. Capitol in Washington REUTERS/Kevin Lamarque

“It’s very expensive to administer, very prone to error,” Romig said. “One thing that’s included in this SSI Restoration Act is just getting rid of those rules. There aren’t rules like that in any other federal program and just getting rid of those rules altogether and allowing people to support their friends and family without being penalized.”

Calling for expansion and simplification, the SSI Restoration Act — which is currently in Congress — aims to upend some of the more outdated rules and bring the program into the modern age. But overhauling an antiquated system costs money, and by the Social Security actuary’s estimation, it’s about more than $500 billion over 10 years.

"I don't think that's probably in the cards for the kind of package that we're talking about right now on Capitol Hill," Romig said. 

Read more: 3 surprising facts about Social Security

But, she added, addressing certain issues with the program — like the income and asset rules — it would cost less than $100 billion over the same time period. 

"That might be something that policymakers could fit into a package like the one they're discussing now," Romig said. 

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Stephanie is a reporter for Yahoo Money and Cashay, a new personal finance website. Follow her on Twitter @SJAsymkos.

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