Here’s Why Young Workers Might Want to Start Paying Attention to the Social Security Solvency Crisis  

There’s about six years left before Social Security faces a severe funding shortfall. Once its trust fund is depleted, which could happen as early as 2032, retirement benefits will be slashed, unless the government comes up with another way to raise revenue.

As The Motley Fool explains, that could mean increasing payroll taxes. This would shift the burden of funding benefits to the working population, mostly millennials and Gen Z.

The article states: “The latest Social Security Trustees Report indicated that the payroll tax rate — currently 12.40 percent, split evenly between employee and employer -— may have to increase by as much as 4.27 percentage points to keep the program sustainable for decades to come.”

What would a payroll tax increase mean in dollars and cents? Right now, employees pay 6.20 percent, but that would jump to 8.34 percent if taxes are still split evenly. So, if you earn $60,000 per year, your payroll taxes would increase from $3,720 to over $5,000.

This could set off a dangerous cycle. The article explains, “Losing more money from your paychecks upfront could make it harder for you to save for retirement on your own, thereby increasing your reliance on Social Security in retirement.”

A Better Answer

The Seniors Trust believes the best solution to solving the Social Security solvency issue is The Social Security Expansion Act. This landmark bill buttresses the long-term solvency of Social Security by expanding benefits for seniors – not cutting them — and not making seniors work more.

If passed, this legislation will make four major changes to Social Security for retirees:

• Benefits will be increased for most recipients by about $200 per month.
• The Consumer Price Index for the Elderly (CPI-E) will be used to calculate Social Security Cost-of-Living Adjustments (COLAs) instead of the Consumer Price Index for Urban Wage Earners (CPI-W) used currently. The CPI-E takes the unique spending habits of seniors into account — particularly regarding the cost of healthcare — and offers a more realistic COLA for retirees.
• The minimum Social Security benefits would be increased to provide higher payments to seniors and greatly reduce senior poverty.
• The long-term solvency of the Social Security program would be guaranteed.