Social Security is a very fluid program that undergoes frequent changes that can impact your monthly benefit payments — for good or for ill. Some of these changes are already built into the system, while others come about following legislative bills or administrative decisions.
If you’re a non-retiree still in the working world and have not yet filed for Social Security, a number of changes could cut your potential benefits. Here’s a look at four of them.
Looming Funding Shortfall
One of the biggest impacts will happen after Social Security’s Old-Age and Survivors Insurance (OASI) Trust Fund runs out of money, which is expected to happen in about a decade. When it does, Social Security will have to be funded solely by payroll taxes — and those only cover 77% of current benefits. According to a recent report from the nonprofit Committee for a Responsible Federal Budget (CRFB), some newly retired couples could face a cut of more than $17,000 a year when the OASI is depleted.
Raising the Retirement Age
2024 presidential candidates Ron DeSantis and Nikki Haley have both floated the idea of raising the full retirement age for younger workers to help deal with the upcoming funding shortfall. Such a move would amount to benefit cuts “across the board,” according to the Center on Budget and Policy Priorities (CBPP). The reason is that retirees will have to wait longer to get the full benefits they are due — which means either settling for smaller payments by claiming benefits early or forgoing payments by waiting longer.
Higher Social Security Payroll Taxes
Among the proposals to bolster Social Security before the OASI runs dry are to hike Social Security payroll taxes and/or raise the income threshold at which taxes are no longer deducted. Currently, workers have 6.2% of their wages deducted from their paychecks for Social Security taxes. If that percentage increases, the financial impact for non-retirees will be smaller paychecks.
High earners could also be affected if the income threshold is raised. In 2023, only wages up to $160,200 are subject to Social Security payroll taxes. Some lawmakers have proposed raising the threshold to $250,000 or higher — or eliminating it altogether — which means current workers could face taxes on a bigger chunk of their income.
According to an analysis by the Social Security Office of Policy, if no action is taken to strengthen Social Security, the benefit reductions caused by insolvency would “double the poverty rate” of beneficiaries who were between the ages of 62 and 76 at the time insolvency took place. In addition, all beneficiaries would have their scheduled benefits cut by 27% as early as 2039.
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