How should we "save" Social Security?

Discourse isn’t showing me a thread on this unless you go back to 2005, so I think a new topic might be worthwhile compared to resurrecting such an old thread.

Social Security is now doing better than it was before the pandemic. It’s now scheduled to go another year before benefits will have to be cut, which will still be around 10-15 years. I don’t think either party really wants to be in power once the trust fund runs out of money, but neither do they want to be the ones to bite the bullet and do something about it. There are many options available, and I might guess that the best option will be a combination of all of them.

  1. Raising full retirement age. We’ve already done this in the past. Assuming they allow for the same sort of lead time as before, it will take a long time to be effective, and thus won’t contribute anything to the current problem being faced, but is something that seems to be inevitable as life expectancy increases, although apparently in the US it’s not actually increasing, but that’s another topic. This will presumably be a part of what keeps the system stable in the extreme long-term, with the full retirement age perhaps pushed out beyond 70 eventually, but that might be a century into the future.

  2. Raising the Social Security tax. This was also done in the past, with the last change in 1990. Currently the tax is 12.4% on the employee’s wages, half of which is withheld from the employee’s pay, with the employer having to come up with the other half. Given that the projection is that only 80% of the benefits will be payable once the trust fund empties, that suggests we need to raise the rate by one-quarter, which would put it at 15.5%, or 7.75% each half. That’s roughly a 1.5% decrease in take-home wages, which isn’t huge, but wouldn’t be a very popular option since it’s bore most heavily by those on the lower end of the income spectrum. Perhaps we could increase the rate .1% every 2 years until it gets to a nice round 14% or 7% per half? That probably won’t be enough to completely save the current level of benefits, but it would help.

  3. Raise the Social Security wage base. Currently you don’t pay Social Security tax on over around $150,000 in wages. Raising the cap would mean that people would qualify for higher benefits eventually, but there is already a massive decrease in the rate at which increases in your wages taken into account for calculating your benefit increase the benefit. I don’t know how much money this might bring in, but it seems like the obvious choice to definitely implement, even if it doesn’t help all that much. Just continue the trend of how wage increases affect the size of benefits as it stands now, and it’ll take much more in than it spends on those increased benefits. I’m an advocate of fully uncapping this, because the system is already very progressive in terms of how wages relate to benefits, so making it even more so really shouldn’t be that big of an issue.

  4. Increasing the income tax collected on Social Security. This covers a wide variety of possible methods of recouping some of the Social Security paid out via income tax. Currently, up to 85% of one’s Social Security can be subject to tax at ordinary income rates depending on your total income. If you request your account transcript from them, you’ll see that the IRS calculates how much of your tax is due to Social Security, and thus I assume it gets earmarked to be returned to the trust fund. It’s possible to crank that 85% up to 100%, and also possible to make it subject to an additional tax, perhaps making it necessary to return all of one’s benefits in income tax. This would be the best way to implement means-testing Social Security, in my mind. One thing related to this that will happen probably regardless is that more and more Social Security will get taxed as inflation continues increasing benefits and other incomes, but the numbers used the calculate how much of it gets taxed do not get adjusted for inflation like most other tax dollar amounts.

  5. Promising less in benefits to future retirees to protect the benefits of those already retired. We can simply change the calculation of how one’s wages determine the size of one’s benefit. We presumably wouldn’t touch the amounts that low-income workers would be eligible for, but we would make those who earned a good living not get as much as they might be promised as of today. This could be extended in any number of ways, possibly to the point where everyone gets the same amount of money based on number of credits earned, as it’s not hard to earn 4 credits a year. 40 credits is currently required to qualify for retirement benefits, and anything beyond that is irrelevant in terms of credits and only average wages in the top 35 years matters, but if we instead say you get benefits proportional to the number of credits earned up to 140 credits, we’d not be giving higher earners any more than lower earners in a basic retirement income. Higher earners should have their own source of funds saved during their working years if they want more than this basic amount to live on.

As mentioned above, if we don’t implement something in the next 15 years, benefits will be cut across the board to 80% or so of promised benefits, which will plunge the most vulnerable elderly into poverty. Every time I see a story about Republicans wanting to gut Social Security, I wonder why they don’t just focus on fixing the system that we have, given that many of their core constituents are relying on it, and there’s a cliff in the not-too-distant future that will automatically be hit if they don’t do something reasonable about it now.

This is the one I would favor, even though it would impact me. I don’t like raising the retirement age or reducing benefits. It wouldn’t have to be all or nothing; there could be a doughnut hole, excluding income between $150,000 and $300,000 for example. On the other hand, if I’m paying a whole lot more in SS taxes, I’d like some increase in monthly benefits when I retire.

I’d like to know if #4 is true. I didn’t think any federal taxes paid on SS earnings went back into the trust fund but I’d be happy to be proven wrong.

I think a combination of 1, 2, and 3 are best. Slowly raise the retirement age, increase the payroll tax by 0.5% or so, and eliminate the upper limit on payroll taxes. SS is already rigged so that the lower income levels get a better return on their contributions we could make sure that the top tier pays on all their earnings but with a less than proportionate increase in benefits.

Here’s what Social Security says on the subject: Taxation of benefits Apparently though some of it (the 50 to 85% portion) is given to Medicare, not Social Security, so I wasn’t 100% right. It also means that whatever law we pass to increase the rate of tax on SS can be directed to them, or not, as it happens to be implemented.

I think there is a limit to how high we can raise the retirement age. This is especially true for people who work in physically demanding jobs: their bodies won’t allow them to work until 70. It’s also true for thinking-type jobs, too though. I’ve seen so many people who, at 60, thought they’d work 10 more years, but by 63, 64 realized they absolutely could not.

This is conflating actual retirement age with what’s called “Full Retirement Age”. There’s no reason* you have to start taking Social Security the exact same time you retire, and there’s no requirement that you wait to start taking Social Security until your Full Retirement Age. You won’t get as much per month if you start taking it sooner, but you’ll get on average the same amount over your life regardless of when you start taking it - waiting on taking it is simply you betting you’ll live longer than normal. They could change Full Retirement Age to 70 today, but change how benefits are calculated such that there would be only very minor change to the benefits of anyone retiring. It’s just a base point from which everything is calculated, and if you do move up Full Retirement Age without changing the details around it, you end up paying less in benefits eventually.

*if you have any reasonable amount of other retirement savings

I feel like the people who are least able to keep working (physically demanding low wage jobs) will be the least likely to be able to put off collecting, or to survive on reduced benefits.

Another idea is apply social security taxes to investment income. Before the affordable care act, investment income was not taxed for medicare. The ACA both taxed investment income for medicare, but also implemented a higher rate for high earners (3.8% instead of 2.9%).

My solution would be a mix of raise the tax rate (maybe to 14% from the current 12.4%), raise the cap (with maybe a donut hole for high income earners) and start taxing investment income, especially investment income above a certain threshold. I think those 3 reforms would keep it solvent indefinitely.

Highly paid professionals already pay a ton in taxes. If you make 500k a year you probably pay 30-40% of your income in taxes. I wouldn’t support raising the cap on people earning 160-500k, but maybe at incomes above 500k the SS tax could be added back in.

Also I’d have a higher rate for investment income above a threshold of maybe 500k+

Perhaps a graduated system where the tax is something like 5-8% on incomes from 160-500k, but 14% on income above 500k. My point is that families of doctors, travel medical professionals, lawyers, tech people, etc can have household incomes of 200-500k. They’re not the ones that need higher taxes, they’re already taxed a lot. Its more people with 6-7+ figure investment income who need to be taxed for SS.

  1. Quit raiding the SS fund and using the money for unrelated purposes.

Yes, I had to retire early to take care of my husband. Well, I still work two days a week 'cause I don’t get squat on my own record, and ironically I get even less squat on his record.

Their “fixes” hurt working class people. If they would keep their mits out of the “trust fund” it would fix a lot. They need to quit raising the retirement age. Oh, and Republicans need to quit trying to get rid of Social Security.

Those who think they should stop raiding the trust fund; what instead should happen to the accumulated funds?

Congress hasn’t raided the SS fund for one penny. When SS runs a surplus, it by law has to buy government securities and when it runs deficits, it cashes them in like any other investor. This is a myth that deserves no credence.

Remove the inverted tax structure, called the wage base in this thread. Social Security tax has the highest tax rate paid by the lowest wage earners. With every dollar of income over $150,000 the Social Security tax rate goes down. Those most able to afford the tax pay the lowest tax rate.

While I agree changes need to be made to keep SS solvent, in no way should people getting it today see a reduction in their benefits. This is what was promised to them, and pulling out the rug from under them in their remaining years is unnecessarily cruel.

According to this, over 18% of Americans earn more than $150k. Removing that cap on income would go a long way towards solvency.

In theory, you could attack the problem from the other side.

In the OP, all of the proposals are either to raise more money or to delay payout. An alternative would be to lower the cost of retirement so that the payout could be lowered while increasing the end benefit.

My assumption would be that most spending by the elderly goes towards food, medical stuff, shelter, and utilities.

The cost of food can be lowered through immigration reform and import adjustments, I expect. Investments in vertical farming and vat-grown foods could also, plausibly, both bring down the cost of living.

Rather than risk a debate, I’ll just say that health care and drug costs can be reduced - but we’ll leave the implementation undiscussed.

Investments in dormitory style accommodations for the elderly could help to bring down housing costs by lowering the entry level market. There are probably further options available.

Laws that suppress nimby suits against power plants and infrastructure in preference of a coordination committee that enfranchises locals into the development of public projects - or pays them dividends - could help to reduce the cost of local taxes, local utility rates, and local transport costs.


Yep, eliminate the cap on earning subject to tax and increase the tax. Probably increase age as well. The best solution is likely the one that will have the most people complaining!

I also suggest a means test on the wealthy. Admit that SS retirement is - in large part - wealth redistribution. I personally have no sympathy for very wealthy people complaining about how it is THEIR money that shouldn’t be taken away (generally accompanied by claims that THEY could have invested it more wisely.) SS has been changed many many times over the years, generally to afford greater benefits to non-wager earners. I see no reason why a change in the other direction should be different.

I think this would minimize the cost to those who can least afford it. I don’t know that people would have to qualify for higher benefits, but allowing that might preserve the fiction of SS as a retirement program that I pay into to pay myself later.

What about simply supplementing from the (more progressively funded) general fund? I bet I haven’t fully thought out the implications.

I’ve been thinking an excise tax on stock, bond and derivatives sales would be a good way to fix SS. There’s a megametric ton of stocks and bonds that change hands every day. A small tax, say about 0.2%, would probably be all that’s needed.