Social Security reform is a topic that most retirees and those wanting to retire someday care about. And yet it seems to be a hot potato for our leaders. Estimates say the Social Security fund will not be able to pay retirees their full benefits in ten years or so. So there is a deadline and the problem gets worse the longer we wait. After researching the subject I just don’t see why something can’t be done.
So Important For Many People
Studies show that for a majority of retired people Social Security makes up over 50% of their income. For many it is closer to 100%. I see some calling Social Security an “Entitlement” program. This I really don’t get as most people pay into SS their whole working lives and there is an obligation to make sure SS is there when they need it most. It is not optional.
Ideas to Shore Up Social Security
There are many ideas out there to fix Social Security. Her are some of the more popular:
Raising the SS Payroll Tax Cap
The SS payroll tax stops at certain income limits that change over time. The limit for 2023 is $160,200. This proposal would raise the limit to $400,000 or more. More tax would be collected that way from higher income individuals.
Reducing Benefits for Those With High Incomes
The idea here is that high earning individuals don’t need SS as much so dollars could be saved.
Raising the Retirement Age
People are living longer and staying healthy longer (at least that is the theory.) If SS didn’t start until a higher age than again dollars could be saved. Most proposals suggest doing this gradually over time.
Increasing the Payroll Tax
Nobody likes paying higher taxes so this idea is a little less popular. However studies show that even small increases could help considerably.
Reduce the Cost of Living Adjustment
Social Security benefits are adjusted once a year to help account for inflation. This proposal would decrease the amount of those adjustments to save dollars.
My Take
Here is my take on each of the above proposals. Of course this is just my opinion and you are entitled to your own!
Raising the SS Payroll Tax Cap – This one probably appeals to me the most. Here is my reasoning.
We all get used to certain items coming out of our “gross” paychecks. This includes things like taxes, insurance premiums, 401K contributions, and of course Social Security. We learn to live on the remaining “Net” amount to pay our bills. For high earners the SS portion stops at some point during the year. My thinking is that since higher earners have been living with their “Net” before the “stop” they can continue to do so with limited pain.
Reducing Benefits for Those With High Incomes – I actually like this one much less. This is for the same reason as I consider SS not to be an entitlement. High Earners paid into SS just like all the rest of us and they deserve to get something back for that “investment.”
Increasing the Payroll Tax – I don’t really like this idea but I guess a very small increase might be OK in conjunction with other changes if it truly fixes the problem.
Raising the Retirement Age – A small adjustment may be OK if it is gradual. One issue I have is that if we are asking people to work longer we better make sure they are protected against age discrimination. Age discrimination is very real in many corporations. I have seen it personally.
Reduce the Cost of Living Adjustment – Not a fan of this one at all. Inflation is very real and it may be worse for older people. The rising cost of healthcare is the most obvious example.
Conclusion
The proposals I discussed here are just some of the possibilities. It just seems like there should be some common ground to fix the Social Security problem before it is too late.
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