Social Security – Fix or Fumble the Political Football
The Center for Retirement Research at Boston College reports that the Social Security “trust fund” is due to deplete its surplus reserves by 2035. Contrary to sensationalized reports, the authors illustrate the system isn’t headed toward insolvency. Yet adjustments will be needed to maintain current funding levels. Social Security collects FICA taxes near 10.6% of earnings; 14.3% is needed to fully fund retiree benefits. This 3.7% funding gap is depleting reserves and needs a fix. Otherwise, economists estimate future recipients will receive about 25% less in benefits if Congress doesn’t act.
Options for Congress
The study prescribed the following options and quantified the cost and time each would need to replace the “trust fund” depletion:
1. Raise the payroll tax rate on existing workers.
2. Eliminate the income cap subject to FICA (only the first $132,900 is subject to the tax).
3. Raise income taxes
Who Pays What, For How Long, and How Much?
The table below summarizes the findings of the study. Each option is listed, broken down by income stratification, and how many years it will take to replenish the reserves so a cut in benefits would not be needed.