Adjustments must be made to Social Security, the popular and essential government program that provides millions of senior Americans with a key source of income. Without modifications, the program is predicted to lack the funds necessary to cover all benefits within a decade.
To restore the program’s financial viability, all alternatives must be on the table, including the modification of benefits and the introduction of additional funds. But, suggestions to raise the age at which individuals can receive full Social Security payments should be towards the bottom of that list.
First, let’s put this “problem” into context. Social Security is not anticipated to run out of money before 2033. Its trust fund is used to pay for a percentage of benefits. The trust fund for social security was established in 1939, Old Age and Survivors Insurance Trust Fund, to keep and invest assets that aren’t required to pay for current Social Security payouts. Most of the Social Security retirement benefits cost is financed by payroll taxes, which employees and employers share. These levies currently cover almost three-quarters of Social Security retirement payments. Withdrawals from the trust fund make up the difference. So, if the trust fund were depleted, payouts would be reduced.
The country’s birth rate declined and the enormous baby boomer group reached retirement age, resulting in more money being withdrawn from the trust fund. Since the program’s inception, the ratio of working individuals to retirees has decreased dramatically. In 1960, there were five employees for every Social Security pensioner, and this number is currently fewer than three.
There are several solutions to this issue. Expenditures from the trust fund might be decreased by reducing benefits, and more money could be added to the trust fund by increasing payroll tax receipts.
A bipartisan group of senators, including Sen. Angus King, has undertaken the arduous and thankless process of searching for realistic methods to update the program.
It was reported last week that a Senate panel was discussing, among other things, hiking the retirement age to 70. Employees can retire at age 62 and get partial benefits, but most must wait until age 67 to receive full benefits.
Increasing the Social Security retirement age will undoubtedly be detrimental to many Americans from the working class. In recent years, the average life expectancy of Americans has declined, and for Native Americans, it is much below 70, while for African Americans, it is just above 71. As the full retirement age increases to 70, many individuals will pass away before receiving Social Security payments.
The life expectancy of low-income People and those with more physically demanding employment is much shorter. These individuals have the greatest need for Social Security assistance; therefore, safeguarding them from future benefit reduction should be a top concern.
On the other hand, Social Security may collect additional funds. Social Security payroll taxes have an annual limit of $160,000, indicating that no Social Security taxes are collected on wages over this threshold.
Removing this restriction and imposing the present Social Security tax of 12.4 percent on all incomes would keep the trust fund solvent until about 2070.
Politically, this would certainly be seen as a tax hike, but having high-income people contribute more to Social Security would have widespread advantages.
Senators attempting to strengthen Social Security face a difficult task. Yet, they have time to ensure that any modifications are appropriate and do not excessively affect the employees who use Social Security payments the most.