Social security administration is going through a financial crisis. The agency, which is responsible for providing retirement and disability benefits to more than 60 million Americans, has started losing money as more beneficiaries withdraw their bonds from the system than Americans of age. work does not pour.
While the program recorded a small surplus in 2020, it is expected to have a large deficit by the end of 2021 and be insolvent by 2034. At this point, if no action is taken, the benefits will simply be reduced. by about twenty to twenty-five percent – an incredibly unpopular step, and possibly political suicide for all elected officials forced to implement it.
This step is by no means inevitable, and there are a number of solutions Congress could adopt quickly to close the financial gap. Here are three.
Eliminate social security tax caps
Right now, there is an income cap – currently set at $ 142,800 per year – above which a person does not have to pay Social Security taxes. In theory, this is fair, because paying more taxes above that amount does not translate into additional Social Security benefits after retirement. However, many of the wealthiest people in the United States earn considerably more than $ 142,800 per year; taxation of income above this level could instantly correct the social security trust fund deficit. This step has already been proposed to Congress, with questionable chances of success.
Reduce benefits for high incomes
As its name suggests, Social Security is primarily a “security” program for American retirees, preventing them from falling into extreme poverty. For the wealthiest Americans who have saved far more in their lifetime than they will ultimately receive in Social Security benefits, they are already secure and, the argument goes, don’t need to. other government benefits.
Currently, it is estimated that Americans with the highest incomes will receive back into Social Security fifteen percent of their annual earnings. If that number were reduced to five percent and no other income group was affected, the Social Security Administration would save billions of dollars a year.
Increase the full retirement age
When Social Security was founded in 1935, its “full retirement age” – the age at which a person could retire and claim full benefits – was 65. Extending this age would reduce the Social Security Administration’s obligations towards the elderly.
To some extent, the Social Security Administration is already doing this. The “full retirement age” has since increased steadily; for Americans retiring today, it is set at 66 years and a certain number of months and will drop to 67 by the end of the decade.
Trevor Filseth is a current affairs and foreign affairs writer for the National interest.