Social Security keeps millions of Americans out of poverty each year, and benefits are often the largest source of income for seniors. But the aging population has created a serious problem for the program. According to projections from the Board of Trustees, Social Security ran a deficit of $47 billion last year, meaning the cost of paying benefits substantially exceeded income. And the trustees expect that problem to continue indefinitely unless changes are made.
So what? The Social Security trust fund is on pace to be depleted by 2035, at which point payroll taxes would cover just 80% of scheduled benefits. That would be a serious problem for the millions of Americans that need Social Security to make ends meet. Of course, lawmakers in Washington are well aware of the situation, but political tension often causes the wheels of change to turn slowly.
Fortunately, a survey from the University of Maryland offers a bit of good news for beneficiaries. Most Americans (whether they identify as Republicans or Democrats) support four changes to the Social Security program that would eliminate 95% of the budgetary shortfall over the next 75 years. And if voters can find common ground, Congress will almost certainly manage the same feat in the future.
Here are the details of those four changes.
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1. Increase the Social Security payroll tax
More than 70% of Americans (Republicans: 70%, Democrats: 78%) are in favor of increasing the Social Security payroll tax rate. Currently, employers and employees both contribute 6.2% of wages (12.4% total) to the Social Security program each year, but raising the tax rate to 6.5% for both parties (13% total) would eliminate 16% of the budgetary shortfall, according to the University of Maryland.
2. Apply Social Security payroll tax to more wages
More than 80% of Americans (Republicans: 79%, Democrats: 88%) want to apply the Social Security payroll tax to more wages. Under current law, the payroll tax only applies to the first $160,200 in earnings, meaning any wages above that threshold are not taxed to fund the Social Security program. But implementing a second threshold to tax all wages over $400,000 would eliminate 61% of the budgetary shortfall.
3. Raise the retirement age
More than 70% of Americans (Republicans: 75%, Democrats: 76%) are in favor of raising the retirement age. Under current law, workers are not entitled to their full Social Security benefit until they reach full retirement age (FRA), which is 67 for individuals born in 1960 or later. But gradually raising FRA to age 68 over the next decade would eliminate 14% of the budgetary shortfall.
4. Reducing benefits for high earners
More than 80% of Americans (Republicans: 78%, Democrats: 86%) are in favor of reducing the Social Security benefits paid to individuals with income in the top 20%. That change would eliminate 11% of the budgetary shortfall.
What the survey results mean for beneficiaries
Beneficiaries can learn two things from the University of Maryland's survey. First, it is possible for Republicans and Democrats to agree on Social Security reform. Second, keeping the Social Security trust fund solvent will probably require a combination of solutions, some of which will boost funding and others that involve benefit cuts.
