Changes Americans are willing to make to fix Social Security

[RetireBy90]

SS needs a better ratio of working people to retired people.
COVID did a decent job of killing off lots of us older folks (I'm 72).
So maybe we need to make more younger folks now...

More immigration would help as they tend to have more kids. Wouldn’t solve the problem by itself but may help.

The WSJ piece mentioned above also stated in 1935 SS had 42 people contributing for every 65 year old retiree and by 2019 there were only 2.7 workers per retiree. The system is broken. There are temp solutions but it is like the tax code in that the original program doesn’t work with so few workers per retiree. You have to change the ratio or fixes won’t last.

 

[USGrant1962]

This tool lets you play with fixing SS. It is updated through the 2021 report. You will see, for example, that eliminating the taxation cap could close 57% of the funding gap - but doesn't solve it. Increasing FRA to 68 fixes 12% of the gap.

https://www.crfb.org/socialsecurityreformer/

 

[madatrub]

I can tell you one thing thats broken with it. I could go out today (at 49 yrs old) and collect SSDI at more than if I worked another 17 years and took FRA SS payments. People who barely work then rig the system (those who take advantage of it) to collect social security disability is part of the problem here. Not even sure if its from the same bucket, but its still a huge problem.

 

[marko]

Most people don't understand that currently income above the cap is neither OASDI-taxed nor contributes to the individual's SS benefits.

If they raise the cap, the income would be taxed but there are two options:

1. Also reflect that income in the individual's SS benefits. Politicians may decry this as raising Social Security benefits for the rich.

.

But I'm taxed for a lot of things that I never see the benefits of. I'd think a "life (or SS) isn't fair for the rich" would be a great spin for politicians.

 

[corn18]

This tool lets you play with fixing SS. It is updated through the 2021 report. You will see, for example, that eliminating the taxation cap could close 57% of the funding gap - but doesn't solve it. Increasing FRA to 68 fixes 12% of the gap.

https://www.crfb.org/socialsecurityreformer/

I used the tool and fixed everything.

 

[Bigdawg]

Even though I paid in for almost 40 years I do not/will not need SS. I propose a system where I can skip/donate/forego my SS but get a tax break for doing it. Let's say I forego 2K/month at age 62. Instead of giving me 24K/yr, give me a 24K tax deduction. It's not one for one but it would lessen my tax burden a little bit and leave 24K in the kiddie for someone else to use.

 

[corn18]

Even though I paid in for almost 40 years I do not/will not need SS. I propose a system where I can skip/donate/forego my SS but get a tax break for doing it. Let's say I forego 2K/month at age 62. Instead of giving me 24K/yr, give me a 24K tax deduction. It's not one for one but it would lessen my tax burden a little bit and leave 24K in the kiddie for someone else to use.

Better yet, send me a list of 100 people who think they need my SS more than I do and let me interview them. I will pick one or two that will get my benefit.

 

[Irishgirlyc58]

I've never understood why raising the cap is such a problem. In my work days I'd hit the cap sometime in March or April. I never would've minded keeping it through the year, it was money I never missed in the first place.

It just seems like such an easy,simple thing to do! But then again, we're talking about Congress

I agree. I usually hit the cap mid year. The first time it happened I thought payroll had made a mistake. [emoji23]
I thought at the time what a ridiculous rule.

ETA: I don’t like the idea of raising retirement age again. I think 67 is plenty old enough. Not everyone lives into their 90’s or 80’s for that matter.

 

[jazz4cash]

Not a surprise that 81% support a reduction in earnings for the top 20% of earners. I expect ~90% would support a reduction for the top 10%. I dont see how they define earnings.


From the survey:
Reducing Benefits for High Earners: 81% (Republicans 78%, Democrats 86%) favored reducing benefits to the top 20% of earners, eliminating 11% of the shortfall. High earners would still get higher benefits than others, but less so.

 

[almost there]

The solution TO EVERYTHING seems to be "raise taxes"
Not a great plan.
Unless your retirement is funded by taxes...

 

[11522914]

Come on people. The FRB can handle the deficit, SSQE.

Social Security Quantitative Easing.

Fixed and done. No pain other than a little transitory inflation. [emoji16]

 

[SecondCor521]

But I'm taxed for a lot of things that I never see the benefits of. I'd think a "life (or SS) isn't fair for the rich" would be a great spin for politicians.

That may be true in general, but my statement was in the context of SS.

The politicians already say that, so it's not much of a stretch to think it would be extended to SS as well.

 

[SecondCor521]

I can tell you one thing thats broken with it. I could go out today (at 49 yrs old) and collect SSDI at more than if I worked another 17 years and took FRA SS payments. People who barely work then rig the system (those who take advantage of it) to collect social security disability is part of the problem here. Not even sure if its from the same bucket, but its still a huge problem.

Apparently two different buckets, and the SSDI one is actuarially sound. It's traditional SS that has funding issues at the moment.

I agree with you that people take advantage of entitlements including SSDI. My semi-ex-uncle for one.

 

[Gumby]

My understanding is it's because there is a cap on benefits. So, you'd be asking some folks to pay more in, without any corresponding increase on the way out. (fine with me, probably fine with a lot of those high earners to). But the worry about position (capped benefits, uncapped contributions) is that removing the cap would further erode overall support for the program among particularly tax-averse voters.

I don't see raising the ages as helping - firstly because the age expectancy hasn't risen hardly lately, and secondly because post-60, good paying jobs are harder to find than they are when you're 35 and mid-career.

Just add a third bend point and give them something for their added contribution. Nobody understands bend points anyway.

I agree. I usually hit the cap mid year. The first time it happened I thought payroll had made a mistake. [emoji23]
I thought at the time what a ridiculous rule.

ETA: I don’t like the idea of raising retirement age again. I think 67 is plenty old enough. Not everyone lives into their 90’s or 80’s for that matter.

At one time in my life, I would hit the SS cap at the end of February (because that's when we got our bonus for the prior year) and then get a 6.2% boost in take home pay for the rest of the year. I would not have missed it if I didn't.

 

[corn18]

Just add a third bend point and give them something for their added contribution. Nobody understands bend points anyway.



At one time in my life, I would hit the SS cap at the end of February (because that's when we got our bonus for the prior year) and then get a 6.2% boost in take home pay for the rest of the year. I would not have missed it if I didn't.

The second bend point is at 15% above $6,100 (ish) a month, so add a third bend point above that. Maybe 5% above $10,000/mo.

I had the same when I was working. Bonus posted in Feb and took me well north of the SS limit. I was surprised the first time it happened and would never have noticed if they kept withholding 6.2%.

They sure have raised the cap a lot (I think it's $147k now):

And there sure seems to be an opportunity for a rate increase. Maybe make it progressive.

 

[cyber888]

Raise the cap on SS wages. Raise it to $400k.

Why not make it to $500K

 

[Andre1969]

I'm surprised that raising the cap on SS earnings would eliminate so much of the shortfall, especially since they're only bringing it back at the $400+ and up threshold, which implies to me that $147K-$400K would not be affected.

Years ago, I read that the cutoff (currently the $147K) was designed to capture 90% of all wage income. So if that's still the case, it doesn't seem like there's much income left out there to tax.

 

[athena53]

And add another bend point. Taxation without benefits will never fly. But add another bend point at say 5% of the amount over $10,000. Won't be a good ROI, but for high earners, at least the gov't can say they are getting some benefit from having their income taxed.

I'd support this (and no, it would not affect me). People making over $400K/year are in a far better position to save on their own.

Getting more young people into the system, through immigration or reproduction among our current populace, is not a long-term solution. we're just making the same unsustainable promises to them while handing over their payroll taxes to current SS recipients.

 

[scrabbler1]

Most people don't understand that currently income above the cap is neither OASDI-taxed nor contributes to the individual's SS benefits.

If they raise the cap, the income would be taxed but there are two options:

1. Also reflect that income in the individual's SS benefits. Politicians may decry this as raising Social Security benefits for the rich.

2. Not reflect that income in the individual's SS benefits. I think this is new ground in the sense that all other OASDI-taxed dollars have at least a chance of providing a benefit down the road. Straight taxation without any benefit wouldn't sit well, but it wouldn't sit well with higher income folks, so they might just have to suck it up.

I suppose one could create a third bend point as a compromise between the two above options.

My prediction continues to be that there will be a political response sometime before 2035 where the OASDI taxes will be raised and benefits will be increased somehow. The increasing benefits part doesn't make much sense in terms of solvency, but I think it helps people accept the higher taxation: "Oh, well at least I know get free Netflix with my SS benefit" or whatever it ends up being.

Thank you for describing so well the problem with raising the income cap without the corresponding benefits cap, and how raising the former without the latter breaks the link between the two and is IMHO very unfair.

I am somewhat open to creating another bend point to bridge that income gap between payroll taxes paid in and benefits paid out. But I see another problem with this type of solution:

When SS was reformed in the mid-1980s, the concept of prefunding the program with excess payroll taxes collected in the early years so they could be used to pay out benefits later hasn't worked as intended. Congress and the president used all that extra money paid in payroll taxes for other purposes, from spending to other tax cuts. All that was left were a bunch of IOUs which amount to nothing more than claims on future taxes (i.e. the SS Trust Fund) or the issuance of more public debt to pay those claims.

Raising the income cap will continue this unfortunate practice.

One solution to close the funding gap I did not see in the linked article. What about taxing SS benefits more and applying those extra taxes toward the SSTF, something which is done since the tax law change back in 1993-94 which raised the tax rate for higher earners to 85% of SS? This would be a backhanded means test and would shield lower income SS recipients. In return for doing this, we should also index the income cutoffs (read: tax brackets) for taxation of SS benefits, something which is not done today even though other income tax brackets are indexed.

As for raising the retirement age for full benefits, I could see raising it to 68. Given that so much time has elapsed since SS reform was widely discussed (in 2005, after Bush got re-elected), my main concern about moving the goalposts a second time for people already paying into the system has gone away. The youngest people affected by the 1980s reform which raised the retirement age for full benefits from 65 to 67, and who were already paying into the system, are in their mid-50s. I can't see any change to the retirement age failing to grandfather those people into the current max retirement age of 67.

 

[almost there]

Received an email this morning
"Your New Social Security Statement is now available"
Not much new, but opened an attached PDF associated with it.
I have heard about possible reductions, but do not recall seeing it posted on the SS website.
Its listed as a 22% reduction.
Retirement Ready: Fact Sheet For Workers Ages 49-60 (Am 60 till Sep)
https://www.ssa.gov/myaccount/assets/materials/workers-49-60.pdf

"New Social Security Statement
Social Security will be there when you retire The Social Security taxes you pay go into the Social Security Trust Funds that are used to pay benefits to current beneficiaries. The Social Security Board of Trustees estimates that, based on current law, the Trust Funds will be able to pay benefits in full and on time until 2034. In 2034, Social Security would still be able to pay about $780 for every $1,000 in benefits scheduled."

Will be 62 in 2024. Am thinking I should grab the 10 years at the full rate guaranteed more or less. Rather than waiting 8 years till 70 to take it, at a possible 22% reduction. As I have little faith in the decision making process of our government these days. Just wanted to share the pdf link. Was news to me, might be old news to you.

 

[scrabbler1]

This tool lets you play with fixing SS. It is updated through the 2021 report. You will see, for example, that eliminating the taxation cap could close 57% of the funding gap - but doesn't solve it. Increasing FRA to 68 fixes 12% of the gap.

https://www.crfb.org/socialsecurityreformer/

While I like this tool and like the CRFB and its leader, Maya MacGuineas (always look for her on C-Span, where she appeared last week), this tool lacks the creation of an extra bend point to offset an increase in the income cap and keep that link alive.

Its proposal to increase the taxation of benefits doesn't align with mine so well, but I chose it anyway.

 

[Midpack]

Received an email this morning
"Your New Social Security Statement is now available"
Not much new, but opened an attached PDF associated with it.
I have heard about possible reductions, but do not recall seeing it posted on the SS website.
Its listed as a 22% reduction.
Retirement Ready: Fact Sheet For Workers Ages 49-60 (Am 60 till Sep)
https://www.ssa.gov/myaccount/assets/materials/workers-49-60.pdf

"New Social Security Statement
Social Security will be there when you retire The Social Security taxes you pay go into the Social Security Trust Funds that are used to pay benefits to current beneficiaries. The Social Security Board of Trustees estimates that, based on current law, the Trust Funds will be able to pay benefits in full and on time until 2034. In 2034, Social Security would still be able to pay about $780 for every $1,000 in benefits scheduled."

Will be 62 in 2024. Am thinking I should grab the 10 years at the full rate guaranteed more or less. Rather than waiting 8 years till 70 to take it, at a possible 22% reduction. As I have little faith in the decision making process of our government these days. Just wanted to share the pdf link. Was news to me, might be old news to you.

They’ve been telling us about the shortage for decades, not new.

And you believe Congress won’t do anything to mitigate the blow for current recipients? I don’t. The only fair solution to me is some sacrifice by all, lots of ways to get there, none painless. The orgs that lobby for NO changes for recipients expecting current payers make up the contribution shortages to keep recipients 100% whole repulse me, even though I’m a senior. YMMV

 

[wallygator69]

I couldn't agree more!

Get rid of the cap entirely.



Problem solved

 

[Big_Hitter]

I am in favor of most of those changes but not the age increase. A large amount of blue-collar workers can't even physically work until age 62 let alone 67 or 68. If they raise the retirement age to 68 they at least would have to keep the minimum SS age at 62 and institute the minimum benefit stated in the article that includes people who retire at age 62 as long as they had 30 years of work.

agreed for blue-collar jobs

 

[pb4uski]

They’ve been telling us about the shortage for decades, not new.

And you believe Congress won’t do anything to mitigate the blow for current recipients? I don’t. The only fair solution to me is some sacrifice by all, lots of ways to get there, none painless. The orgs that lobby for NO changes for recipients expecting current payers make up the contribution shortages to keep recipients 100% whole repulse me, even though I’m a senior. YMMV

+1 IMO the political reality is that everyone has to "contribute" to SS financial strengthening but the reality is that much of the burden will fall on non-seniors.

I would definitely favor raising the cap significantly but also including another bend point so those high earners get a little something for the additional taxes that they pay. Forget the whole donut hole thing of capping and then uncapping... that's just a political gimmick.

Raise the FRA to 68 to recognize that lngevity has improved since age 67 was set back in the 1980s. Increase the payroll tax 0.5% annually until it is 13%... then hold it at 13%. Go with chained CPI for COLAs.

The above, along with a few other things would probably get you there.