Uncertain Futures: How Proposed Changes to Social Security Could Impact Your Benefits

More than 70 million Americans receive monthly Social Security checks. Over 180 million current workers are paying into the system and expect benefits down the line. But the program is running out of money.

Social Security is a critical program that provides financial support to millions of Americans. However, the program is facing a significant funding shortfall, with experts warning that it will run out of money by 2035. This has led to a surge in proposals from both sides of the political aisle to make changes to the program.

Experts recommend addressing the problem sooner rather than later, and 87% of Americans agree with that sentiment. Unfortunately, there’s been little political consensus to take any concrete steps to fix the program, mainly because all of the ideas being floated are unpopular among one group or another.

Politicians are especially unlikely in an election year to promote plans that involve raising taxes, increasing the retirement age for Social Security recipients or reducing retirement income. Yet voters will continue to hear about possible changes to Social Security through the upcoming election cycle and beyond — because the program is critical to millions and the funding problems cannot be ignored forever.

Donald Trump vs. Kamala Harris on Social Security

Without a legislative solution, Social Security trust fund reserves are on track to be depleted just over a decade from now. At that point, only 83% of benefits would be paid to recipients. On the campaign trail, Vice President Kamala Harris and former President Donald Trump have been united in at least one promise on Social Security: pledging not to cut anyone’s benefits.

5 Social Security proposals (and how they’d affect benefits)

Raise the retirement age

In their latest budget proposal, House Republicans suggest increasing the retirement age for future retirees. The retirement age, which determines when people can claim full Social Security benefits, was last increased by a 1983 law that gradually raised it from 65 to 67 over a period of 22 years. Even though both Trump and Harris oppose raising the retirement age, experts say the public may need to brace for this to happen as it’s one of the most obvious levers Congress could use to address the funding issue.

End federal taxes on Social Security

In campaign speeches, Trump has been promoting a plan to eliminate federal income taxes on Social Security benefits, which are currently paid by about 40% of beneficiaries — those who have more than $25,000 of combined income. Rep. Thomas Massie, R-Ky., has a bill that would do exactly this, but he’s introduced it six times and it hasn’t gone anywhere. The bill also discourages Congress from levying higher taxes to come up with revenues.

Raise taxes on high earners

Over the years, Democratic lawmakers and left-leaning groups have put forward multiple proposals to strengthen Social Security by raising taxes on high earners. The bill that has seen the most support is the Social Security 2100 Act, which more than 200 House Democrats gave their support to after it was introduced in 2021. Among other changes, the bill would expand Social Security payroll taxes to include income above $400,000.

Reduce cost of living adjustments (COLAs)

Social Security benefits are adjusted annually based on a government index called the CPI-W, which tracks monthly price changes in goods and services for urban wage earners and clerical workers. Democrats including President Joe Biden support switching to a more generous COLA formula (based on a different inflation tracker, the CPI-E). Meanwhile, some conservatives want to reduce COLAs to ease the Social Security funding deficit.

Means testing

A means test is a government assessment used to determine an individual’s eligibility for a specific program as well as the level of assistance they should receive. No such test exists for Social Security, which pays benefits to older Americans based on their earnings history. Cirksena says he wouldn’t be surprised to eventually see Democrats show support for some sort of means testing, which could involve reducing benefits for people with higher incomes or net worths.
Source link