A whopping 87% of Americans say Congress should act now to protect long-term funding for Social Security, according to an online survey conducted for the National Institute on Retirement Security, a non-profit, non-partisan organization.
“Retirement is still a bipartisan issue,” says Tyler Bond, research director for the institute. “I think this is an area where all the different sides in our politics can come together and work together and make a difference. “
“Americans from all walks of life love and support Social Security” and are willing to pay more to make it work, says Rebecca Vallas, chief executive officer of the National Academy of Social Insurance. “Poll after poll bears that out.”
Most polls also show people don’t want the retirement age raised any further.
Vallas says the main causes of projected trust fund shortfalls are declining fertility rates resulting in fewer younger workers paying into the system and unanticipated levels of earnings inequality. Since wages above a certain amount — currently $168,600 — are not taxed for Social Security, a larger share of workers’ wages are falling outside the earnings cap, Vallas notes. When changes were made to Social Security in 1983, Congress anticipated that 90% of earnings would be taxed, she says. Currently, it’s just 82%.
To reach 90%, the cap would have to be raised to about $280,000, says Jason Fichtner, executive director of the Retirement Income Institute, who notes that even when the trust fund runs out, the system will be able to continue to pay about 80% of benefits.
While the public may agree that something should be done, Fichtner says he’s unsure whether Congress will act, particularly given the current political climate. But if they don’t, he says, they will be effectively endorsing an automatic cut in benefits.
One suggestion under consideration is raising the age at which workers become eligible for Social Security benefits. That idea is not generally popular in polls. And 47% of those surveyed in this report said they are against it. On the other hand, 52% agree that Social Security should be expanded.
In addition to raising the cap on earnings subject to Social Security taxes, Fichtner says options include a phased-in increase in wage taxes and lowering Social Security benefits going to high earners from any increased taxes. Under the first scenario Fichtner says, wage taxes could be increased by 1% on workers and 1% on employers, phased in over 10 years, meaning taxes would go up by 0.1% a year for a decade.
Fichner says no single proposal would address the entire predicted shortfall in the Social Security trust fund. Consequently, he suggests a “cafeteria menu” of ideas will need to be implemented.
The Old-Age and Survivors Insurance Trust Fund that pays Social Security retiree benefits is projected to run out in 2035, which is a year later than was projected last year. At that point, the fund's continuing income is expected to fund just 83% of scheduled benefits.
Note: A version of this item first appeared in Kiplinger Retirement Report, our popular monthly periodical that covers key concerns of affluent older Americans who are retired or preparing for retirement. Subscribe for retirement advice that’s right on the money.
