The two front-runners for president this year are squabbling about the funding and benefit policies of Social Security, which is contributing to the growing intensity of the program’s future discussion. Additionally, Members of congress have been proposing and discussing a wide range of “fixes” for the system of Social Security.
The primary trust fund that supports the payment of retirement benefits could run out by 2033 or 2034 if nothing is done, according to projections by the Congressional Budget Office & independent academics.
If this happens, promised benefits might then decrease by 25% or more. Few experts on policy anticipate significant modifications to Social Security during the lead-up to or immediately following the elections in November. Yet, they have also voiced their opinions.
For instance, they are discussing whether it is necessary to end the tax benefits associated with 401(k) plans in order to “save” Social Security. Here are some modifications suggested by legislators, lawmakers, and other experts who believe their knowledge can help keep the programme afloat.
Increase The Retirement Age
The Republican Study Committee, which is composed of around 80% of House Republicans, released a plan in late March. In its budget request for fiscal 2025, the group reiterated its demand that the Social Security qualifying age be linked to life expectancy.
Additionally, it recommended cutting benefits for high earners who are not close to retiring, as well as phase-out supplemental benefits regarding phasing earners. Self-described “firebrand” legislator Matt Gaetz has also advocated for talks over Social Security reforms, including raising the full retirement age as a first step towards resolving the country’s debt-limit issues.
Modify The Social Security Tax
A bill to strengthen the financial position of the Social Security programme surfaced in the U.S. House of Representatives in January. This bill would eliminate the federal taxation on payments and gradually phase away the current wage cap on taxable wages.
You Earned It, You Keep It Act is a measure that lawmakers Angie Craig, a Democrat from Minnesota, and Yadira Caraveo, a Democrat from Colorado, are sponsoring.
The MPs said that the changes would improve programme equity and postpone the crucial Social Security pension trust fund’s anticipated insolvency date until 2054, or 20 years later than the current estimate of 2034.
There has been a mixed reaction to the suggestion in the retirement planning community. For example, the American College of Financial Services’ Michael Finke, a professor and the Frank M. Engle Chair of Economic Security, expressed his hope that the proposal would serve as “a first salvo in an essential bipartisan negotiation regarding the fact of how to fix Social Security.”
He declared, “Politicians will not permit an automatic benefit cut in 2033.” “Reducing benefits or raising taxes are the only two methods to stop benefit reduction. Since no politician likes to reduce benefits, an increase in taxes appears inevitable.
Finke contends that a combination of boosting the net income taxation on capital gains, expanding the amount of earnings subjects to taxes, changing the adjustment for inflation to better represent senior expenditures, and raising the full retirement age would be the optimum course of action.
Create an Investment Fund
Sen. Bill Cassidy, a Republican from Louisiana, proposed a repair to Social Security almost a year ago. He said that the front-runners for president are “afraid to touch the programme when what they ought to be terrified of is a 24 percent drop in benefits, lacking a borrowing ability to address it.”
To support the system and maintain the viability of the main trust fund utilized to pay retirement benefits, senators Cassidy and others suggested creating an investment fund.
