Americans are being frightened unnecessarily about the state of Social Security and it is all the fault of incompetent politicians‼️
Here is an example from a Facebook retirement planning group.
I’ll be taking SS before the current depletion date of 2033. How do I best model the split benefits (pre-2033=100%, post-2033=77%)?
Here is an example of four modest changes that will make the program sustainable:
The following results are from the Committee for a Responsible Federal budget Social Security Reformer interactive tool.
Increase the payroll tax by 1.5% Social Security is financed primarily from a 12.4% payroll tax, split equally between employer and employee. That tax could be increased or decreased as desired. Or apply the increase only to employers.
Subject wages above $400,000 to the payroll tax. The payroll tax currently applies to roughly the first $160,200 of wages, and this taxable maximum increases annually with average wage growth. This option would immediately apply the payroll tax to all wages above $400,000. It would also pay out benefits equal to 2% of the newly-taxed income, which is much lower than the 15% rate that applies to earnings just below the taxable maximum.
Include newly hired state and local government employees. Some state and local government employees are exempt from the Social Security system. This option would require all newly-hired state and local workers to pay into the system, and then receive benefits from the system.
Note that estimates associated with this option assume it is enacted in conjunction with other options to bring spending and revenue in line by the end of the 75-year window. Absent these policies, this option would increase the shortfall in the 75th year.
Tax cafeteria plans for the payroll tax. Currently, the payroll tax applies to wages before deducting 401(k) retirement contributions but after deducting “cafeteria plan” contributions for things like health insurance premiums, flex savings plans, and daycare benefits. This option would equalize the treatment of retirement and cafeteria plans so neither were deductible against the payroll tax.
Adopt these changes and Social Security will be sustainably solvent for the next 75 years and beyond due to a growing trust fund.
QUINNSCOMMENTARY 
The windfall elimination provision (WEP) and government pension offset punish people like me who worked at a public service job and didn’t pay into SSa. I now have a job where I pay into both SSA and a pension. But my SSa pension will be cut by 45% because I was a public servant. How is that fair? I contribute the maximum SS taxes every year. I actually think it would be fair for high-income person like me to pay more (ie, increase the SS wage base limit >168,000). But I should not be punished for being a public servant by having my SS pension cut.
LikeLike
“The average single-earner couple will receive 62 percent more in benefits than they pay in taxes. And that disparity will worsen over time – the same couples retiring in 2055 will receive 44 percent and 69 percent more than they pay in, respectively.”
Committee for Responsible Federal Budget,
DEC 18, 2023
So how is adding more people (public sector workers)going to balance costs?
LikeLike
Because it adds revenue in the short term and it’s all measured over a 75 year horizon. I have been collecting for 14 years and collected 100% of the taxes I and my employers paid within the first 8 years of beginning benefits not counting my wife’s benefit on my earnings.
LikeLike
Me too, I guess. I retired in early 2009. So, who’s been paying us the last six years? Is that just ROI, and how long can it continue?
LikeLike
Are these figures adjusted for the time value of money? What would the value of those contributions been if they were invested over your entire working career?
LikeLike
Will the higher incomes paying this new increase get a proportionate increase in their benefit ?
LikeLike
They will get something extra, but not at the same rate as lower earnings.
LikeLike
Everyone wants Congress to pass a tax that affects others, not themselves. Everyone wants Congress to cut benefits for the other guy, not themselves. It is all a bunch of musical chairs to the tune of: “don’t tax you, don’t tax me, tax that guy behind the tree.”
The only appropriate solution is to keep all of the current “social” factors in place, the relative taxes an individual must pay to obtain the benefits he/she receives, including all of the wealth transfer in this social system. Then, raise sufficient revenue to fill the gap and/or close the gap to match the revenue. Regardless, solutions that don’t have retirees pay more, since they did not fund the promises Congress made, are nonstarters.
As I have noted many times, the best solution is to raise everyone’s taxes, including those receiving benefits, and then give each individual a choice of paying more in taxes or electing some other change in benefits.
Else, you will get a new version of the 1983 crap where the politicians decided what would cost them the least number of votes, but, the solution would not make the system indefinitely sustainable … and we would still have the idiots in the beltway conspiring on how to improve benefits to buy votes.
LikeLike
“…increase only to employers.”? If only. If it increases the cost to the employer – it impacts what is available to be paid to the employee. You know that given your career in corporate benefits. There’s no free lunch.
LikeLike
“The government made promises to us, and now they don’t want to keep those promises, because it means they must raise taxes to do so.” This is a paraphrase of what you have previously written.
Politicians of course fear casting votes which may cost them their jobs.
If more voters took the trouble to understand the facts rather than rely on politicians and others who tell them what they want to hear, our elected politicians would have less reason to fear losing their jobs over voting in the best interests in the nation.
LikeLike
Good points
LikeLike
So, what will get Congress off it’s backside and act?? If there were true leaders elected, not beholden to special interests and their own self interests, it would get done. Must we wait until the 11th hour and implement a less than deal ‘fix’ ?!!
LikeLike
Congress has been warned and urged to act by the SS trustees every year for two decades and has failed to do anything. They don’t want to tell people the truth. Revenue must be increased by higher taxes on everyone. They use SS as a football misleading as much as possible.
LikeLike
Once you allow the politicians to control a supplemental retirement system you are bound to run into trouble. The best retirement system would be , in my opinion, one that allows the workers to have more control over the benefits. This has been done in other places, but it would take real leadership to see something like that here in this country.
The solutions brother Quinn suggests sounds sensible and logical which is why it could be tough to gain traction. We were told that the Reagan/Greenspan “solution” back 40 some years ago would carry us through–I am not sure the 75-year plan is any more creditable but none of us will see it.
LikeLike
Eliminate the pensions for Congress and put them on SS. See how fast they fit it!
LikeLike
Congress pays SS taxes and must contribute toward their pensions and they must have five years in Congress to get a pension. But the question is why do we allow a congressional career that requires a pension at all.
LikeLike
Mr Quinn, Thank you for the information. You are correct about Congressional careers. Term limits! Yes I know we have term limits. They’re called elections. But when we have 35% voter turnout they don’t work.
LikeLike
“82% of Americans support term limits – This includes 76% of Democrats, 89% of Republicans, and 83% of Independents (McLaughlin 2018). It is the most popular and most bipartisan issue in America.”
I did not know that. And I disagree totally. Most people want term limits for the other guy, and keep voting their own guy in.
“Lobbyists and special interest groups have great influence on freshmen congressman. It takes several years for a new member to learn the ropes and know how to recognize the lobbyists’ sales pitches. Until then, new congressman are easily led, both by private lobbyists and by members of the federal bureaucracy whose experience the new congressman cannot match.”
A revolving door of newbies.
LikeLike
While logically there is no reason for term limits if voters do their job, the reality is we just vote by name recognition and thus once in office most stay. Yes, it takes a couple of years for a new person to learn the ropes, no, lobbyists do not target new members because they have no influence, have no key committee positions. I walked the halls of Congress lobbying years ago and it was not newbies we wanted to talk to.
In the early years of Congress those elected did their job and went home, that was until the party system took over.
I think of term limits not necessarily as currently structured, but say two three year terms for the House and two four year for Senate or something like that. The very idea that Congress can earn a pension based on services should tell us there is something wrong.
LikeLike
It’s not entirely true that politicians are needlessly dawdling over changes in social security or that they are too incompetent to vote yea or nay to the laundry list of potential funding increases.
The simple solutions have details embedded that create blowback and inequities if enacted. For example, in cases where police and fire are not covered by social security currently, they have earlier retirement based on state and local agreements. Social Security doesn’t have any provision for such. Likewise, there is rapid increases in wages above the current social security maximum and therefore more wages are not counted. These are just a few examples but all solutions have more than just a simple answer.
LikeLike
Early retirement in pension plans has nothing to do with SS. Many private non- government plans have ER provisions before age 62. The wages above the maximum would not be counted for benefits or taxes, just like everyone else.
LikeLike
If you put all currently noncovered state and local employees into social security, it certainly would affect early retirement. I doubt very many state and local governments are going to run both a pension and ssa without limits on the extra costs. Maybe I’m wrong but the current windfall and pension offset that SSA runs is an indication that I’m not. What you speak of is non government pensions.
I apparently didn’t make it clear that the wages above taxable amount was a separate comment from pensions. The wages now earned above the SSA taxable amount are increasing rapidly. Hence, more wages are escaping the taxable base. My comment was geared toward that.
LikeLike
And those wages are also ignored for benefits and SS liabilities. As long as only taxable wages are creating benefit liabilities it doesn’t matter. As you know the system is based on taxable wages To tax wages not counted for benefits changes the program into a form of welfare. That was never the intent and IMO should not be. Similarly general revenue should not be used which would place it in the budget mix
LikeLike