Many people are eagerly anticipating the upcoming presidential inauguration, but the reality is that Joe Biden is set to take office at a very precarious time. Not only must he address the pandemic and the glaring economic crisis it created, but he'll also be tasked with helping Americans secure their retirement -- an area where lawmaker support has been lacking.
In fact, in a recent Transamerica survey, 49% of workers say addressing Social Security's funding shortfall should be a major priority for Biden and Congress. And given the hit the program may have taken during the pandemic, that's even more important now than ever.
Social Security is in trouble
First, let's get the doom and gloom out of the way. Social Security isn't going completely bankrupt, despite rumors to the contrary. In the coming years, the program will owe more money in benefits than it collects in payroll tax revenue as baby boomers stage a mass exodus from the workforce, and too few replacement workers come in to pump money into Social Security. The program does have trust funds it can tap to compensate for a near-term revenue shortfall, but once those funds run out of money, benefit cuts will be on the table.
The question of when that will happen, however, is now up for debate. Before the pandemic, the Social Security Trustees believed the program's trust funds would run dry by 2035. But Social Security has lost a lot of payroll tax revenue this year due to the widespread unemployment crisis, and for that reason alone, the timeline could be pushed up. This especially holds true if the jobless rate climbs again or stays high in 2021.
It therefore makes a lot of sense that addressing Social Security's financial woes is something the public wants to see our new president prioritize. So far, Biden has a number of ideas designed to strengthen Social Security, one of which is to implement additional taxes on wages for higher earners. Workers don't pay Social Security taxes on all of their income. In 2020, earnings beyond $137,700 were exempt from those taxes, and in 2021, the same will hold true for earnings above $142,800. Biden is proposing to reinstate Social Security taxes on earnings above $400,000 so that the wealthy pay into the program and help keep it afloat.
Of course, his proposal is merely that -- an idea that requires buy-in from Congress in order to come to life. The good news, however, is that it's clear that president-elect Biden is focused on salvaging Social Security and preventing benefit cuts from taking place. That should, in turn, give the working public some peace of mind, especially amid a pandemic and recession.
Millions of seniors today rely heavily on Social Security to pay the bills during retirement, and many current workers would, in theory, like to be able to do the same. But if the program's finances don't turn around quickly, extensive benefit cuts may be the harsh reality that future recipients face.