Please ensure Javascript is enabled for purposes of website accessibility

7 Social Security Reforms Preferred by Majority of Americans

By Christy Bieber – Updated Aug 17, 2021 at 4:27PM

Key Points

  • Social Security is a popular program, but Americans support changes.
  • Some of the proposed modifications would fundamentally alter the entitlement program.

Motley Fool Issues Rare “All In” Buy Alert

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

How many are you in favor of?

Social Security is a really popular entitlement program and Americans want to preserve it for future retirees. But that doesn't mean people aren't open to changes.

In fact, a recent survey conducted by Nationwide found there are several reforms that the majority of Americans support. Here's what they are. 

Person reviewing financial documents with calculator.

Image source: Getty Images.

1. Ensuring COLAs keep pace with true inflation

Nearly 9 out of 10 survey respondents said they supported a change to Social Security's periodic raises. These raises, called cost of living adjustments, or COLAs, are supposed to ensure benefits retain their buying power. That hasn't happened, with Social Security benefits losing around 30% of their value over two decades.

The current COLAs are based on price changes tracked by the Consumer Price Index for Urban Wage Earners and Clerical workers. So, it's not a surprise they don't accurately measure the increase in senior spending -- or that a majority favors shifting to a different approach to calculating benefit increases.  

2. Taxing higher earners more to support Social Security

Shoring up Social Security by taxing the wealthy is enormously popular, favored by 79% of survey respondents. This was proposed by President Joe Biden who pledged to impose new Social Security taxes on people making more than $400,000.

But it's not as straightforward as it seems. See, right now, taxes are directly linked to benefits. Workers pay taxes on income up to a certain limit (called the wage base limit), and their benefits are based on their average taxed wages in their 35 highest-earning years.

While higher earners don't pay taxes on wages above the limit, those wages also don't result in larger retirement benefits for them. If retirees were taxed more without a corresponding increase in benefits, this would fundamentally change Social Security from an entitlement program and could erode its broad support. 

3. Providing a Social Security credit to unpaid caregivers

Because Social Security benefits are based on average wages over 35 years, those who do unpaid work for periods of time may see smaller benefits -- or may not even qualify for Social Security based on their own work history. Around 74% of people want to change that, by giving Social Security credits to those who provide care but don't work for pay. 

The logistics of this could be a challenge, though, and this could worsen Social Security's funding problems because people would no longer get benefits tied to the money they paid in. 

4. Providing COLAs only to middle-income or low-income households

Although most people believe COLAs should be increased, a majority also believe not everyone should benefit from them. In fact, 64% of survey respondents said they'd support these periodic raises going only to low- and middle-income households. This would mean that wealthier Americans would see the value of their benefits fall over their retirement as inflation eats away their buying power.  

5. Eliminating the cap on payroll taxes

Eliminating the cap on payroll taxes would also have the effect of wealthy people paying more for Social Security. It would eliminate the wage base limit, so every American would owe payroll taxes on all their earnings.

This approach is supported by 63% of survey respondents. But, again, this raises the question of whether wealthier people who are taxed on more of their income would also see higher benefits as a result. If not, turning Social Security into a redistributionist program could potentially impact public perceptions. On the other hand, if wealthy people did end up with much higher benefits because they were taxed on all their earnings, this wouldn't necessarily improve Social Security's funding issues. 

6. Privatizing part of Social Security benefits

Privatizing part of Social Security benefits means allowing Americans to keep more of their money to invest for retirement on their own, rather than paying as much into Social Security.

It receives support from 58% of survey respondents. But past attempts at privatization have not been popular and there's a risk people would mismanage the money and end up with too little retirement income to live on. 

7. Means-testing benefits

Finally, means testing benefits is supported by 58% of survey respondents. If this were implemented, everyone would continue to pay into Social Security taxes, but only people with incomes below a certain threshold would actually receive retirement benefits. This could also undermine the near-universal support Social Security enjoys, and would fundamentally change the structure of the entitlement benefit. 

Ultimately, some of these reforms may be considered, but, despite the fact that they have broad support, most are unlikely to actually become law due to logistical difficulties or the challenges in changing one of America's most beloved government benefits. 

The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.