Two Ways We Can Extend the Social Security Trust Fund
There is reason to be concerned. According to the 2022 Social Security Trustees report, Social Security is predicted to exhaust its trust funds by 2034, at which time benefits will be cut by 23 percent. An article by U.S. News & World Report posted on MSN cautions that next year’s 8.7 percent Social Security cost-of-living adjustment (COLA) could cause the Social Security trust funds to use up their resources even sooner.
According to the article, a couple of simple tweaks to the Social Security program could make it sustainable for the foreseeable future:
Increase the full retirement age (FRA). The age for full benefits for most Baby Boomers is 66. The full retirement age is 67 for people born in 1960 or later. One way to keep the system viable is to gradually increase the FRA, but that will hurt those who claim benefits early.
Cap Social Security payroll contributions. FICA taxes are withheld from paychecks to fund both Social Security and Medicare. In 2023, the maximum amount of income subject to Social Security tax will be $160,200. That’s more than double what it was in 2000 ($76,200) and considerably more than it is this year ($147,000).
Experts say that if the cap on taxable payroll contributions was eliminated, it would address between half to two-thirds of the projected Social Security shortfall. Another option to bolster the trust fund would be to increase the payroll tax (which is currently 6.2 percent for workers). The article says polls show that many Americans would be comfortable with a modest increase if it meant their benefits would not be cut in the future.
Scrap the Cap
Many people believe the system is not fair and are calling on lawmakers to “Scrap the Cap”. The reason is that the current formula favors high income wage earners because they do not pay Social Security taxes on income over $147,000. Critics are calling for lawmakers to remove the wage cap so that everyone pays their fair share. They believe the burden falls on lower wage earners and want to see the wealthy shoulder a bigger portion of the taxes that fund Social Security.
The Seniors Trust agrees that we need a change. One of the best ways to solve many of Social Security’s issues is to enact the Social Security Expansion Act. By getting rid of the payroll tax cap, we can continue to support Social Security benefits far into the future.
