Each year a projection is made by the trustee for the Social Security Trust Fund that uses past data to estimate when the promised benefits will no longer be able to be paid in full. The precise year changes, but it is widely believed that an accurate time frame for such to occur is between the years 2029 – 2033. A range of potential fixes, whether suggested by political conservatives, libertarians, or independents, should seriously be considered in an effort to fix the system.
Change the Base Tax Rate
Currently, workers pay 6.2 percent of their wages into the system with a matching contribution by their employers. One proposal calls for a 1.0 percent increase in that rate, which could be phased in over a period of time, such as 20 years for example. Other more extreme plans would increase the tax rate immediately and perhaps to as much as 8.2 percent.
Change the Tax Cap
Presently, the system taxes only the first $117,000 of earnings. Options include a gradual increase in the cap, an immediate increase or an outright elimination all together. Although this remedy would impact a relatively small portion of workers, approximately 6 percent according to most experts, those individuals would receive added benefits as well. Currently, the benefit calculation does not include amounts earned in excess of $117,000.
Change the Retirement Age
The original retirement age was 65 but now is 66 for most baby boomers and 67 for those born after 1959. Current proposals involve a gradual or immediate increase in retirement age to 68 or even 70.
Change the Cost of Living Adjustment
The consumer price index is the benchmark by which current cost of living adjustments are calculated. Some suggest the use of other, slower growing measures of inflation instead of the CPI as a cost saving measure.
Institute a Means Test
This measure would eliminate social security benefits for individuals and couples with certain threshold non-social security retirement income. Suggestions typically fall in the $55,000 range for individuals and $110,000 for couples.
Maintaining the System’s Integrity
Changing work forces and life expectancies make minor alterations in social security logical. The population is both aging and living longer and what once may have worked may not now. Careful and thoughtful planning can help ensure retirement and social security disability benefits will continue as people have come to expect.