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According to the 2025 Trustee Report, the actuarial deficit for the combined Social Security trust funds under the intermediate assumptions is 3.82 percent of taxable payroll for the 75-year period 2025-99.
We could discuss endlessly how and why we got to this point, but I hope we can agree there is no excuse having had thirty plus years to deal with a coming crisis.
I have a suggestion to get on the right track- take a concept from private pensions. Employers must contribute enough to meet future obligations (target normal cost + amortization of underfunding). Plans must aim toward 100% funding over time However, below 80% funded benefit restrictions may apply (e.g., limited lump sums, no benefit improvements).
We need to bite the bullet and tell Americans the truth about Social Security funding and set the tax rate as the actuaries note at 16.22% worker-employer combined. But the real significant changes comes after.
Once we have the needed tax level, we set the rate on automatic by law. That is, each year the rate is adjusted (or not), up or down using actuarial calculations to assure funding remains adequate for the 75-year projection period (essentially a generation.) No law change, no political involvement required. Any legislated benefit changes would immediately be reflected in the tax rate.
Frankly, I view these taxes almost as insurance premiums providing a retirement annuity, disability benefits, survivor benefits and protection for children.
Once and done. Too simple right? The problem is getting Americans to accept the facts instead of the latest meme😢
we need to get the very wealthy folks who receive no or very little in wages to contribute to SS.
But they collect no benefits either. That would change the entire concept of Social Security into welfare. What about the non wage earnings of the not so very wealthy?
AMEN, Dick. Social Security is not welfare.
Take a look at this article about our tax system
https://www.nytimes.com/2026/04/17/opinion/ezra-klein-podcast-ray-madoff.html?unlocked_article_code=1.blA.YIRd.hknlgp0rHY1D&smid=url-share
Could a financial transaction tax be a viable solution to bolster the Social Security trust fund? Considering that labor and capital contribute roughly equally to the US GDP these days, is this a practical approach?
Another option is to establish a sovereign wealth fund with the sole purpose of supporting Social Security. I find it puzzling how the US government manages its licenses, land leases, mineral rights, and other equity stakes.
Lastly, the financial industry consistently advises us to maintain a 60-40 portfolio for a secure retirement, why can’t the trust fund also invest in equities for young Americans who have decades of work ahead of them before they can access the system?
Richard,
I am in total agreement on your suggestion to increase the current FICA/Medicare deductions to the 16.22% level. In addition, the cap on the FICA tax should be removed, just as it was on the Medicare Deduction.
There is no excuse for the capping of one and not the other, especially with the system being underfunded, primarily due to low birth rates over the past 2-3 decades.
Other changes/adjustments should be considered to resolve the Social Security/Medicare pending crisis. These include increasing the minimum age to file for Social Security benefits, as well as sound, focused, unbiased financial education on the benefits of delaying filing for benefits.
Despite overwhelming mathematical evidence that delaying filing until at least FRA provides greater overall benefits, over 60% of all recipients file for their benefits before reaching FRA. Considering the additional fact that only 8% f recipeints wait until age 70 to file, the need for this financial education becomes even more obvious.
Lastly, under no circumstances should we allow Congress to punish those currently receiving benefits. NO Means Testing, NO Reduction in benefits due to the earned benefit amount being received, and NO Delay in COLA, as you suggested. The single most important factor required to solve the issues we are faced with is to KEEP THE PROMISES MADE to those who followed the rules to which they were subjected. No more “moving the goal posts” or “changing the rules of the game after the game is underway.”
I must disagree in part. People file for SS before FRA or before age 70 because they need the money. I think it is wrong after all these decades to change that.
Removing the cap is fine provided there are benefit credits on all earnings. At some point taxing all earnings should allow a lower tax rate.
However, there is a difference between Medicare and SS. Medicare has an unlimited liability increasing not aligned with earnings growth.
i have been collecting SS since November 2008 before then and certainly after changes should have been made. Is it fair that everyone like me should completely escape the burden of making SS sustainable simply because of the inaction by Congress when changes should have started at least in the mid 1990s? I don’t think so.
Mike,
”…increasing the minimum age to file for Social Security benefits”
It seems that it would make sense to push this out two years to restore the timeline between it and the full retirement age which is now two years later than before the ‘80s changes. This would eventually increase recipients’ income, but in the meantime would give a little added time until saved up the funds would run dry.
IMHO, increasing the FRA and/or the tax rate is counterproductive. I see it almost as taking more money from the poor to further enrich the well-to-do.
As has been proposed elsewhere, removing the cap is a terrific idea that deals with the funding problem. (Implementation wise, it might be politically more saleable to start with a “donut-hole” till $400K and have it fill naturally over time.) Other incremental changes such as broadening the tax base will also help.
Ram,
You are aware that the US Social Security system is tweaked by the government, especially to benefit “the poor,” paid for by “the well-to-do,” aren’t you?
It insurance. It’s the law intentionally because lower income earners have less ability to accumulate assets and wealth. The accrual rate is a bit better for the lower income
Social security, on its face (or in theory), is indeed supposed to serve as insurance for lower-income workers. However, in practice, it takes a larger bite out of the earnings of lower income workers and is therefore regressive in the sense of taking a bite out of their utility. While one could argue that lower-income folks get proportionately greater returns, any reasonable adjustment for longevity wipes out that advantage. (There is a strong positive correlation between income and age of death.) My comment reflects these realities. In short,
Increasing the cap would address both these concerns without imposing additional costs on the lower-income folks. All of the incremental costs accrue to folks making over $400K a year.
Increasing the cap or taxing over $400k does not make SS sustainable. From day one all workers have shared the same tax rate, I see no reason to change that, especially since we are talking a couple of percentage points.
Whatever the solution is, it needs to be simple and easy to communicate, understand and most of all, implement. The government has a tendency to over-engineer things, whether its income taxes, Medicare, Social Security, etc. Lots of people leave money on the table because they simply don’t know to navigate the details – and lack the understanding, motivation or money to hire someone who does. I suspect, though don’t know, that it is the very people who most need the money that don’t know how to maximize their benefits.
As long as the SS funding system is based on people having children and/or immigration it is doomed to eventual failure as the base of the pyramid can, and has, change(d) over time.
To their credit, the Australians saw that as a fundamental flaw in the USA’s SS system.
As the situation worsens, we Americans resort to toxic politics and end up blaming some other group of people. This scares me even more.
Not only that, if workers have to pay huge SS taxes, they’re even less likely to be able to have children.
How do you define huge?
I wish I could give this 100 up votes, because it is absolutely true. This is a demographic problem, and it will not be solved until that is fundamentally addressed. Increasing taxes on a relatively smaller cohort will not fix the problem and may actually make it worse.
Suggestions that don’t have the same impact? Perhaps less obviously.
No matter what, a declining population means somebody pays more.
Americans HATE taxes!
BUT a survey from the National Academy of Social Insurance (AARP-funded) found that 85% of Americans support raising taxes to prevent benefit cuts, while 87% of voters—both Democrats and Republicans—support taxing earnings over $400,000 to improve solvency.
True, yet when did people not support higher taxes on someone else. Only 6% of earners earn more than the current SS tax cap.
This certainly seems to be one solution to the mathematics of the financial problem.
Especially important is the implementation of some kind of automatic rate adjustment based on future situations.
Other options to consider that could be implemented instead of increasing SS tax rates by the full 30.8% (12.4 to 16.22) include:
There really is no need to raise the FRA IMO . The cap rises regularly, that could be tied to the wage index. Eliminating the cap would mean less of an increase in the tax rate. However, it is important that if the cap is eliminated, there is some additional benefit accrual too even at the lowest bend point. Only 6% of workers earn above the cap and that has been pretty stable over many years.
There are many minor changes that add up. Just taxing Section 125 cafeteria plan contributions helps.
I feel like, for most of my working life, I benefited from a tax rate (6.2%) that was too low. That rate surely would have been increased during that period if your idea would have been implemented back in the 80s. Increasing the tax to 16.22% is an approximate increase of 33%, it’s not realistic to believe that anyone would swallow that. I think all the affected parties should help right this ship. I’m not adverse to paying tax on a larger portion of my benefit. I could not agree more, that there be annual adjustments based on the actuaries review. Our elected representatives have proven themselves not capable of doing their jobs. Still, we need to ‘get on their case’ in order to force action. Call your representatives!
Dan, I agree that the 6.2% rate has been too low and as Dick references evidently 6% of the workforce earn above the cap above which the tax is no longer deducted. I was “fortunate” to be in that 6% for most of my career. For years it has never made sense to me that when I reach 70 (I still have a few years to go) the stressed Social Security (S.S.) system is going to send me a “check” each month. As I have referenced in these pages before, my view of S.S. when I was young was pessimism (that I’d ever see any S.S.)- followed by indifference/mixed feelings as to why I should ever receive anything – to now as I approach 70, derision. I plan to either donate my S.S. proceeds (if I ever receive them) or use them to stuff grandchildren’s 529’s and or “Trump Accounts”.
With all this said, while it won’t entirely fix the S.S. system’s many shortcomings; there ought to be a win/win path for higher income people to pay their fair share to support the system for those who NEED it then have a reasonable path to opt out of ever receiving benefits.
“Win/win” might mean that the “cap” is replaced with a “threshold” above which the 6.2% (or prevailing %) of an individuals income is contributed to a mandatory Total Market Index Fund in a de-facto IRA account of sorts. If a person participating in this program waits until 70 they would have the irrevocable option of either collecting S.S. albeit predicated on a higher level than the current “cap” since they contributed more *or* opt out of S.S. benefits entirely and revert to having access to their Total Market Index de-facto IRA which they can then invest as they see fit. They would then pay capital gain tax on any withdrawals, the proceeds of which would flow into the Social Security Administration. Note: if they for whatever reason opt to collect traditional S.S., they forfeit the IRA and the proceeds move into the Social Security Administration coffers.
In summary:
A fair fix should include those of us now collecting and working people, but that is a good trick. The screaming would be deafening. Only way I can think of is some modification of future COLAs for higher income beneficiaries.
I also favor a five year delay in a COLA for anyone collecting the maximum SS FRA benefit at the start of their benefits. They should have saved to deal with inflation.