What the Future Holds In Store for Social Security
Although no one truly knows what the future holds, it’s a well-known fact that the Social Security trust fund is running low. The most recent report by the Social Security board of trustees revealed that Social Security’s cash reserves will be fully depleted by 2034. If that happens, Go Banking Rates says there will be no choice but to cut benefits. Many fear retirees could see their monthly checks slashed by about 20 percent. Obviously, no one wants to see that happen.
Why Are We In This Situation?
Before we can talk about possible solutions, we need to understand why we are in this predicament. The problem is that the Baby Boomer generation is retiring — and they’re living longer. There simply aren’t enough younger workers in the workforce contributing payroll taxes to make up the deficit.
The government needs to figure out how to take in more money or there will be no choice but to cut benefits.
Tax Talk
One option to boost trust fund reserves is to increase the payroll tax. Currently, employees and employers each contribute 6.2 percent of wages (for a total of 12.4 percent). However, there is a wage cap. Payroll taxes are currently only paid on income up to $147,000. Some people are calling on Congress to “scrap the cap,” which would have high wage earners contributing more.
This idea is favored by many leading lawmakers, including sponsors of the Social Security Expansion Act. This landmark piece of legislation proposes applying the Social Security payroll tax to all income — including capital gains and dividends — for those people who make more than $250,000 a year. This will ensure that the wealthiest Americans pay their fair share.
Additionally, lifting the wage cap could ensure Social Security remains solvent for the next 75 years.
The Seniors Trust is a strong supporter of the Social Security Expansion Act. We encourage you to join our efforts to urge lawmakers to pass this landmark piece of legislation by signing our petition to Congress.
