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Ways To Fix The Shortfall Looming Over Social Security

Inflation
Source: ABC News

It’s only partially accurate, if you’ve heard, that Social Security has been in jeopardy and won’t last long. Although the important program is having difficulties, it is not going to collapse or cease to exist. Better still, there are solutions to deal with Social Security’s problems and strengthen or even improve the program. A closer examination of the issue and potential fixes is provided here.

Social Security Generated A Surplus

The trustees of Social Security publish yearly reports on the program’s state, and the most recent program update was provided in the 2023 report. In their opinion, the Old-Age & Survivors Insurance Trust Fund, which provides funding for benefits to retirees and survivors, will only be able to provide benefits in full until 2033. Following that, the trust fund’s reserves will be depleted, and program revenue will only be sufficient to pay for 77% of benefits as anticipated. If you’re wondering how this came about, history has an answer for you. Millions of workers’ taxes are collected by Social Security, which then uses the proceeds to pay benefits to eligible individuals. This has worked for decades; in fact, Social Security even generated a surplus. This is because many more workers have contributed to the program than have benefited from it. However, the program’s excess has been decreasing and is expected to vanish in 2033.

Social Security can be strengthened in a variety of ways. Several of them were studied, and the most preferred options were identified by the 2023 Social Security Survey of the Nationwide Retirement Institute. The most widely supported one, which has 71% support, is two-fold: it raises the 6.2% tax that employees pay into the program to 7.2% (employers now contribute a further 6.2%) and eliminates the wage cap that keeps people from paying Social Security taxes above a certain level. In 2023, that ceiling will be $160,200. If there was no cap, someone making, let’s say, $1 million could have to pay taxes on their entire income.

Impending Deficit Needs To Be Addressed

A tax on earnings over $400,000 has been suggested. As of right now, beneficiaries are eligible to begin receiving retirement benefits at age 62. With 68% of votes, the second-most popular plan would postpone that until age 64, starting with people who are 50 years of age or younger. Elderly people would still be able to begin at age 62. Raising the 6.2% tax rate to 7.2%, which is paid by both companies and employees, ranks third in popularity. It’s critical to keep in mind that Social Security isn’t and will not run out of funding as long as workers continue to contribute to the program.

However, the impending deficit needs to be addressed by our legislators in Washington as soon as possible. According to the aforementioned study results, Americans are far more in favor of higher tax rates than lower benefit levels. You may choose to let your congressional representatives know about your personal preferences by contacting them. Make sure you’re investing and saving for retirement in the interim so you have a source of income other than Social Security.

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