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Fixing Social Security


As it stands now, social security is scheduled to run out of money by 2034. If that is allowed to happen, about 62 million recipients, or 1 out of every 6 Americans, will have their benefits cut to 79% of the current level. Clearly, no politician would allow this to happen, but fixing the problem needs to start now, not in 15 years when the system is bankrupt.  

Here are twelve ideas that could help fix the system.   

  1. Reduce current benefits
  2. Lower benefits for future recipients
  3. Allow the system to reduce benefits in 2035
  4. Increase current payroll taxes now or in the future
  5. Raise or lift the cap on payroll taxes now or in the future
  6. Raise the age to receive social security in the future
  7. Allow privatization of part or all social security accounts
  8. Eliminate early filing
  9. Change benefit accruals
  10. Change Cost of Living adjustments
  11. Tax State and Federal workers who are eligible for Social Security
  12. Invest the Trust Fund in a diverse portfolio to increase returns

I took these twelve ideas and ranked them on the following criteria:

  1. The positive impact on retirees and near-retirees
  2. Political Popularity
  3. Impact on the Social Security system

The results of my test yielded 4 ideas that scored a 7 or above, and here they are:

4) Raise or Lift the Payroll Taxes Now or in the Future: The problem with this one is that it is just another massively unfair wealth redistribution plan that punishes success. Should this pass, this would mean that W-2 employees would pay an additional 6.2% on income above $132,900. Self employed people would pay 12.4% more on every dollar earned above that threshold. For that additional tax, they would receive no future benefit, so it is transferring their current income to the future income of someone else.  I think this would need to be tweaked by either lowering the rate paid or giving some benefit accrual for dollars paid in above the limit.

3) Invest the Trust Fund in a Diverse Portfolio to Increase Returns: The Trust Fund is invested entirely in U.S. Treasury securities that return almost nothing. Investing a diversified, conservative portfolio would amplify those returns. Why are we not doing this yet?

2) Change benefit accruals: This one could be done behind the scenes and would be the hardest to understand and explain politically.  Essentially, it would change the way benefits are calculated for future recipients, so the payouts would be lower.  This would have a large impact on the system, and could be slanted toward lower income earners to be sold to the public.

1) Raise the Age to Receive Benefits in the Future: I am 42 years old. That means it will be 20 years before I am eligible to receive my first check. If the government came to me and said you can receive 79% of what you though you would be getting in 20 years, or 100% of it in 21 or 22 years, that is a trade-off I will make.   Do I love it? No. Is it a better deal? Yes.



Positive Impact on retirees

Popularity

Impact on System

Total

Reduce current benefits

1

1

3

5

Lower benefits for future recipients

2

2

2

6

Allow the system to reduce benefits in 2035

2

1

2

5

Increase current payroll taxes

3

1

2

6

Raise or lift the cap on payroll taxes now or in the future

3

1

3

7

Raise the age to receive social security in the future

3

2

3

8

Allow privatization of part or all social security accounts

3

1

1

5

Eliminate early filing

1

1

2

4

Change benefit accruals

2

2

3

7

Change Cost of Living adjustments

1

1

3

5

Tax State and Federal workers who are eligible for Social Security

2

2

2

6

Invest the Trust Fund in a diverse portfolio to increase returns

3

2

2

7