Depending on who you listen to, America faces these four problems:
- Social Security faces a significant income shortfall
- The benefits provided by Social Security are inadequate
- Americans for the most part are doing a poor job of saving and investing for their retirement
- Business’s are not paying adequate taxes and also contribute to future retirement problems by their handling of worker retirement programs or have none in the case of small business
Left to their own devices, not much is likely to change. Workers are not suddenly going to take responsibility and become prudent spenders and savers. Corporations are not going to voluntarily take on new spending for retirement programs as relatively few did decades ago.
That leaves us with the sad reality that government must step in (unless you have a better and practical idea).
The answer is simple.
Begin a gradual and consistent increase in the Social Security payroll tax percentage until the trust is sustainable. Thereafter require by law adjustments as necessary to assure ongoing solvency of the trust fund.
Immediately double the employer portion of the Social Security payroll tax from 6.2% to 12.4% and designate that revenue for increased benefits for future retirees. Yes, that may increase some consumer prices and even lower current wage increases, but it should be thought of as deferred compensation.
Raise the taxable wage cap to $400,000, but consider all those earnings in the calculation of future benefits by adjusting the bend points in the benefit formula.
Like I said, if you have a better, practical, workable and fairer solution, let’s hear it.