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.

Collecting Social Security at 62 is a popular option for many retirees. But is it the best option for you?

Collecting Social Security at 62 can be the right option for some people. Depending on your life expectancy the earlier you start collecting Social Security, the more money you may receive over the course of your retirement. In general those with a lower life expectancy might want to start collecting benefits earlier.  Obviously if you need the money to cover living expenses, collecting Social Security at 62 can be a great option.

However, there are some drawbacks to collecting Social Security at 62. The most significant drawback is that your benefit amount will be reduced. If you wait until your full retirement age, which is typically 66 or 67, you will receive your full benefit amount. Additionally, if you wait until age 70, you will receive an even higher benefit amount.

Another drawback of collecting Social Security at 62 is that you may miss out on other retirement benefits. For example, if you are eligible for a pension or other retirement income, you may not be able to collect it until you reach full retirement age. 

Finally, collecting Social Security at 62 may not be the best option if you are in good health and plan to continue working. If you wait until your full retirement age, you will receive a higher benefit amount and you will not be subject to the earnings limit. Additionally, if you wait until age 70, you will receive an even higher benefit amount.

Ultimately, the decision to collect Social Security at 62 is a personal one. It is important to consider your individual situation and weigh the pros and cons before making a decision. If you need the money to cover living expenses, collecting Social Security at 62 may be a good option. However, if you are in good health and plan to continue working, you may want to wait until your full retirement age or even age 70

There is much written online about when you should start collecting Social Security so you should do your research.  The Social Security website itself has good information and tables to calculate how your benefit amount is affected by taking it at different ages.

Disclaimer:  I am not a financial professional and nothing here should be considered to be financial advice.  For professional advice you should consult a professional.

Note:  This post was compiled with the assistance of an AI.  However it was modified considerably for accuracy and content.  Please see my upcoming post on geraldmorse.com for notes of my experience.