3 Social Security Solutions You Haven’t Considered and How They’d Revitalize the Program
Written by
Vance Cariaga
Edited by
Amber Barkley
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Solutions to the coming end of a major Social Security funding source typically focus on three main areas: cutting benefits to save money, raising payroll taxes to boost revenues, or raising the full retirement age (FRA) to deter seniors from filing early.
. That could happen as early as 2032 or 2033, according to recent estimates from the Congressional Budget Office and annual Social Security Trustees report.
When the fund is tapped out, Social Security would have to be funded solely through payroll taxes, which currently cover only about 77% of benefits.
to help pay for the program.
A recent blog on the AARP website outlined several proposals to address the funding shortfall. Some aligned with mainstream ideas such as hiking payroll taxes or raising the FRA, but a few others venture a little more outside the box. Here are three of them.
Broaden the Taxpayer Base
As the AARP noted, not all state and local employees are covered by Social Security. Instead, they are covered by public pensions. If you bring all newly hired state and local pension workers into the Social Security system, you could create a major new source of funding through additional payroll taxes. The downside is that it would also add more beneficiaries who would have to be paid later. But it does offer near-term funding opportunities for Social Security.
Expand the Definition of “Income”
Certain forms of income are not subject to Social Security payroll taxes, such as the value of employer-sponsored group health insurance. By gradually eliminating these exclusions, and collecting payroll taxes on the additional income, Social Security trust funds would remain solvent for about six additional years, the AARP estimates. Another, more far-reaching option would be to levy a Social Security tax on annual investment income in addition to payroll taxes, though that might be a tough sell politically.
Vary Payments Based on Wealth
Also known as “means testing,” this approach would adjust the size of your Social Security payment based on wages, wealth or income, with wealthier individuals getting progressively less than those in lower income/wealth brackets. The idea is to help ensure that people below a certain income level get full benefits, while wealthier individuals sacrifice part or all of their benefits.
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