Social Security is an incredibly popular program, and it's been very successful at keeping seniors out of poverty. However, it's now facing serious financial trouble that's left many Americans to worry about its future. In fact, according to a recent survey from Nationwide, the majority of Americans believe there will soon be cuts to benefits, that money won't be there for them, and that the system needs to change.
While it's not surprising that most Americans want to shore up the program, what is shocking is some of the proposals people are willing to get on board with. In fact, Nationwide's survey showed a majority across generations are in favor of four modifications to Social Security that would amount to benefit cuts for at least some Americans.
Here are the four changes that get majority support, according to those surveyed.
1. Privatizing some of the benefits
First and foremost, as many as 64% of millennials, 61% of Gen Xers, and 51% of baby boomers believe a portion of Social Security benefits should be privatized so people can invest the money as they'd like.
Politicians have suggested privatizing benefits before, and there's definitely an argument to be made for letting people do what they want with their money. However, not everyone is able or willing to invest their funds responsibly for the future, so this could leave some retirees more vulnerable to financial hardship in their later years.
Plus, stripping money away from Social Security by allowing people to invest some of their own cash rather than paying it into the program could worsen the program's finances and lead to an across-the-board reduction in the amount of money it's able to provide.
2. Applying COLAs only for certain households
Changing the way increases to Social Security benefits work also gets majority support, with 62% of millennials, 70% of Gen Xers, and 63% of boomers indicating Cost of Living Adjustments (COLAs) should be applied only to lower- or middle-income households.
The problem is, without COLAs, inflation would eat away at the value of Social Security benefits. Those who don't get periodic raises would see their buying power fall every year as prices rise, and eventually, their benefits would be worth very little.
COLAs are already not keeping pace with inflation, and benefits have lost as much as 30% of their buying power since 2000. If some households got no adjustments at all, this would be a major cut to their income over time.
3. Eliminating the payroll tax cap
Eliminating the cap on payroll taxes gets the support of 61% of millennials, the same percentage of Gen Xers, and 63% of boomers.
The payroll tax cap limits the amount of wages subject to Social Security tax. Those who earn below it are taxed on all they earn, while those who earn above are taxed on only part of their wages.
If the payroll tax cap were eliminated, anyone who earned above it would pay more in taxes. If they didn't receive a corresponding increase in benefits, this would reduce their return-on-investment for taxes paid. That's a form of benefit cut because those people would be paying more in without getting more out.
It would also fundamentally change Social Security, which has never been a form of welfare, but rather an earned benefit, with the amount of money seniors receive directly correlated to what they paid into the system over time.
4. Means testing benefits
Finally, 58% of millennials, 60% of Gen Xers, and 53% of boomers believe that means-testing should be applied to Social Security benefits.
This would mean that some high-earning households would receive either reduced benefits or no benefits, depending on their income. Obviously, this would be a huge cut for those who are affected by the means testing. And, again, it would fundamentally change the nature of Social Security, which could undermine support for it and make everyone more vulnerable to other benefit cuts over time.
Will any of these benefit cuts come to pass?
Many of the proposals on this list, from privatizing benefits to eliminating the payroll tax cap, have been suggested by politicians at various times. However, none have made their way into a bill that's passed Congress. Lawmakers haven't been able to come up with a plan to fix Social Security's finances since 1983, and during this time of hyper-partisanship, it's unlikely they'll find compromise any time soon.
Still, Social Security is in bad shape financially, with the program's trust fund expected to run dry in 2035. If lawmakers don't act, an across-the-board benefits cut of as much as 24% for retirees would occur once the trust fund runs out of money. Such a big cut would be devastating, so it's likely something will have to happen before then. The ideas on this list may very well be part of any changes, so it's a good idea to plan as though your Social Security checks may be smaller in the future.