Social Security was originally designed to serve as a supplement to pensions and personal savings. With the decline of traditional pension plans and lower rates of personal savings, many retirees now rely on Social Security as their primary source of income. Furthermore, the number of people receiving Social Security benefits is increasing as baby boomers reach retirement age.
With such a large generation entering their retirement years, there is a growing disparity between the number of workers contributing to the fund and the number of retirees receiving benefits. According to the 2019 Trustees Report released by the Social Security Administration, if something isn’t done soon to address the gap, expenditures are projected to outpace revenues by 2020, and the current funding surplus is expected to run out by 2035. That makes the future of Social Security anything but secure.
Congressional Republicans and Democrats alike are feeling the pressure to implement changes. The current administration has not proposed a fix for Social Security, but several different proposals are pending in Congress.
Social Security, like other entitlement programs, is hard for politicians to address. A recent Citizen Cabinet survey conducted by Voice of the People stated the challenge this way: “Social Security has been called a ‘third rail,’ implying that it’s political suicide to address it.” The results of that same comprehensive study, however, show that the majority of those surveyed are open to changing the way Social Security works in order to save it both for current retirees and for generations to come.
The study focused on options to increase funding and options to reduce benefits, and found widespread agreement on many important issues.
Raising the retirement age
Raising the Social Security retirement age from 67 to 68 would reduce the funding shortfall by 15 percent — a recommendation that received overwhelming bipartisan support in the VOP survey. The Republican-sponsored Social Security Reform Act of 2016 proposed gradually raising the retirement age to 69, but has not gained much traction yet with Democrats in Congress.
Raising or eliminating the cap on taxable earnings
Each year, the Social Security Administration sets a cap on the amount of wages subject to what is known as the OASDI tax – the old age, survivors, and disability insurance tax that funds the Social Security program. Wages above the cap, set at $132,900 for 2019, are not subject to the tax. Raising the cap would reduce the shortfall.
The vast majority of people surveyed by VOP agreed with a proposal that would raise the cap to $215,000 and reduce the funding shortfall by 27 percent. Moreover, there was significant bipartisan support to eliminate the cap altogether. At least one bill pending in Congress, the Social Security 2100 Act introduced by Representative John Larson, would increase the cap and subject earnings above $400,000 to the OASDI tax.
Raising the payroll tax rate
Approximately three quarters of respondents supported raising the current payroll tax rate from 6.2 percent to 6.6 percent. When broken down by party, three out of five Republicans and three out of four Democrats agreed to the increase.
Changing the amount of monthly benefit payments
At least three quarters of respondents supported lowering Social Security benefits for those who fall in the top 25 percent of earners. Support for this change was overwhelmingly bipartisan, with 73 percent of Republicans and 81 percent of Democrats in agreement. Interestingly, the survey also found bipartisan support for increasing benefits paid to low earners to 125 percent of the poverty line, even though this change would increase the cost of the program and raise the shortfall by seven percent.
Fortunately, both Democrats and Republicans found common ground on many of the changes to Social Security examined in the VOP study. Taken alone or in combination, these changes can significantly impact the long-term health of the program. If you are concerned about the long-term survival of Social Security, make you voice heard by writing your representatives in Congress and sharing your personal thoughts about the program along with the results of the VOP study.