What Is Social Security?
Before diving into the current problem and proposed solutions, it’s important to understand what Social Security is and how it functions.
Source: iStock
The USA Social Security program provides funding for those who have retired or cannot work due to a disability. The money for the program comes from a payroll tax that all Americans pay from every paycheck.
The Problem With the Social Security Program
Here’s the problem: For decades, the Social Security trust has had more than enough money to support all retired and disabled persons in the USA, but a new report states that trust will run out in 2034.
Source: Freepik
And by depleting the $2.9 trillion of funds, the Social Security program will only be able to pay out about three-quarters of the people who need and deserve the assistance.
Something Has to Change
The country’s lawmakers are fully aware that something needs to change and soon, in order to ensure everyone aging into retirement can get their Social Security checks in ten years.
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So the University of Maryland’s Program for Public Consultation (PPC) decided to survey over 2,500 voters to find out what the public thinks is the next right move. And the results from the survey were fairly interesting.
Option 1: Raising the Payroll Tax Cap
Of all voters surveyed, 81% supported the plan to raise the payroll tax cap, including 79% of Republicans and 88% of Democrats. This means that instead of taxing only up to $147,000 of income, the payroll tax would apply to incomes up to $400,000.
Source: Freepik
This plan would eliminate 61% of the shortage and could very well be the best plan of action to support the Social Security program in the future.
Option 2: Raising Retirement Age
With 75% overall support from both Republicans and Democrats, raising the retirement age is also a valuable option.
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The current age is set at 67, but if it was raised to 68, the shortfall is estimated to reduce by 14%. So while increasing the retirement age can’t be the only plan, it could certainly help.
Option 3: Increasing Payroll Tax Rate
About 70% of Republicans and 78% of Democrats agreed that raising the payroll tax rate is a solid option.
Source: Freepik
Currently, the Social Security tax rate is 6.2% of wages, but the proposed plan would increase that number to 6.5%. If this plan goes through, it would reduce the shortage by 16%.
Option 4: Raising Minimum Benefits
One of the questions on the survey asked voters if the government should actually increase the amount allotted for retirees. Currently, they receive $951 in benefits, which for many, is not enough. This proposal asked if those who worked for 30 years or more should receive $1,341 instead.
Source: Freepik
Only 59% of Republicans and 71% of Democrats agree that raising minimum benefits is the right way forward, but if it goes through, the shortage would increase by 7%, making the other options for decreasing the deficit even more crucial.
Option 5: Changing the Cost of Living Adjustments
Another aspect of the survey asked voters if they agree that Social Security benefits should be adjusted based on inflation for the elderly as opposed to the general public.
Source: Freepik
By using the Consumer Price Index for the Elderly (CPI-E), those on Social Security would receive more benefits to increase their household budgets, which would increase the shortage by a whopping 12%. Only 55% of voters agreed with this course of action.
Option 6: Reducing Benefits for High Earners
Finally, 81% of voters, including 78% of Republicans and 86% of Democrats, agreed that those who earned a higher salary while working could receive fewer benefits from Social Security after retiring in order to ensure that low-earners have what they need to survive in their old age.
Source: Freepik
The idea is that high-earners likely saved more for retirement with their 401k, and because this option would reduce the deficit by 11%, it would be one of the best options.
One Thing That Democrats and Republicans Agree On
What’s especially interesting about the University of Maryland’s Program for Public Consultation survey is that the percentages of Democrats and Republicans who agreed or disagreed with each option offered are essentially the same.
Source: Freepik
And these days, finding anything that the voters of the two parties can agree upon is essentially a miracle.
The Next Generation of Senior Citizens Deserve to Feel Safe and Financially Secure
But at the end of the day, it seems everyone can agree that the next generation of senior citizens deserves to feel safe and financially secure.
Source: Freepik
As the promise of Social Security has been one of America’s proudest offerings, even though at the moment it seems that “Social Security is dead,” the government is going to do everything it can to bring it back to life.