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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😢
I disagree with your suggestion to simply increase the current FICA/Medicare deductions to the 16.22% level – which would place 100% of the burden on future workers and their employers.
Simply, that fails to allocate any of the burden to those who have retired – people who failed to contribute enough to ensure the program is sustainable.
Such a decision also locks in Congressional decisions to improve benefits in the past without corresponding increases in taxes – buying votes and sending the bill to generations too young to vote and generations unborn.
What’s to stop Congress from more vote buying if they pay no price for their past deceptions?
It does nothing to return the program to the original intent, to keep full career workers (35 year, 420 qualifying quarter) who retire out of poverty – which would help in our goal to make the program sustainable. .
Long past time to rein in Congress’ vote buying schemes, so we do not end up with additional, idiotic schemes such as the Social Security Fairness Act. I never agreed with GPO and WEP, but, once they were added 43 years ago, once expectations were set, it was stupid to remove them – an action that was an obvious public employee vote buying scheme among many who had already retired.
You seemed obsessed with the idea of vote buying. That doesn’t motivate everything.
Raising the tax rate doesn’t solve everything forever. But i agree the full burden of making SS sustainable beyond 2034 should not fall only on current workers.
what politically feasible ideas are there? I favor suspending the COLA for higher earnings already retired sort of like a reverse IRMAA. But there the problem is there aren’t enough earnings in that category to make a significant difference.
If you avoid being honest with people for 30 years it hard to change direction. Millions of people think Congress stole the trust money for Pete’s sake.
> What’s to stop Congress from more vote buying if they pay no price for their past deceptions?
2028 is the first presidential election where Baby Boomers are no longer the dominant generational bloc in the electorate. They may even fall to third place behind Millennials and Gen X depending on turnout assumptions. The US politics will be interesting to watch as it comes to Social Security and Medicare.
Many in those age groups call SS a scam, see Medicare as socialized medicine. They don’t have a clue and get their info from absurd social media memes. It will indeed be interesting and perhaps disastrous.
Baby Boomers may no longer be the largest generational voting block, but us “elderly” folks (defined as 65+) is. So BEWARE of the elderly voter block, as we are still the most likely to vote percentage wise.
Since Gen X is the next to retire, they are highly likely to side with the Baby Boomers. Together, they are a very strong voting bloc.
I have read the history of SS, including FDRs speeches and writing. I think it was designed very well to meet multiple purposes beyond retirement income for the worker.
It doesn’t need major changes like capping benefits, means testing, etc. it just needs funding that always and automatically adjusts to demographic changes.
If that had been done regularly, the changes would not even be noticed. But cowards in Congress and uniformed voters would not allow it to happen. Now we see unnecessary changes being proposed the try to shift funding to a minority of earners and change the fundamental concept.
You are exactly right about one thing: this should have been dealt with years ago. There is no excuse for kicking this can down the road decade after decade while politicians from both parties acted like math was optional.
At some point, adults have to walk into the room and tell the American people the truth. Social Security is not magic. It is not a wish list. It is not a political talking point. It is a promise tied to numbers, demographics, life expectancy, and payroll taxes. If the numbers do not work, the system does not work.
I think your biggest point is the right one: take politics out of the annual panic and put actuarial discipline into the law. That is what responsible organizations do when they want something to survive. They do not wait until the roof caves in and then argue about who should have fixed it. They fund the obligation.
The American people can handle the truth a lot better than Washington gives them credit for. Tell them plainly: if we want retirement income, disability protection, survivor benefits, and protection for children to remain strong, then the system has to be funded like we mean it. Call it a tax, call it a premium, call it insurance—whatever name people want to use—the bottom line is the same: promises cost money.
The part I like most about your idea is the automatic adjustment mechanism. That is where real reform lives. Not in one-time speeches. Not in campaign slogans. Not in fear-mongering. In a system that adjusts itself based on actuarial reality instead of political courage, because political courage has been in short supply for a very long time.
Will people like it? No. But grown-up solutions are not always popular. Sometimes leadership means telling people what they need to hear, not what polls well.
My practical take: Social Security does not need more denial, delay, or drama. It needs honesty, math, and a funding mechanism that works whether Congress feels brave or not. If Americans want the program protected for the next generation, then we need to stop treating reform like political suicide and start treating it like basic responsibility.
The memes will keep coming. The math will still be there.
“…the automatic adjustment mechanism” would mean that after passage of such a plan politicians would never have to vote have the courage “to raise taxes”, despite polls showing 85% of Americans are willing to pay more Social Security taxes to guarantee promised benefits. You can’t get 85% of Americans to agree that their others love them.
Keying of Dick Quinn’s standing view that Social Security is a form of insurance; I believe this view would be shared by Franklin Delano Roosevelt (FDR) if he were able to add comment here. In any case, why not transition the S.S. system into something akin to true insurance? When you take out and pay into a home owner or auto insurance policy you don’t get a guaranteed annual payment from these policies (other than small periodic dividend checks from mutual policies). Could you imagine the even higher cost of insurance if we all got some form of regular diluted income from these policies?
a) While I do support “keeping the promise” for those who have already started drawing benefits or at least passed or approaching their their FRA; some phase down or “freeze” of benefits seems in order for those who are years away from retirement and do not need the “insurance” of a monthly check from Uncle Sam in retirement. For those paying into the system already but years away from retirement this would be akin to the “freezing” of pensions many of us (non-government workers) experienced in our careers during the transition to 401Ks. As has been suggested here by other writers, some of the funds after the “freeze” could be invested in he stock market to fill the gap on the “promise” for those who started paying in but are years away from retirement.
b) Thereafter, anyone entering the work force would be truly on an “insurance” basis-only receiving benefits on a needs basis after retirement and or if experiencing a life crisis earlier in life as is customarily covered by the “insurance of S.S. today.
c) To be clear, everyone earning wages would have to pay into the S.S. “insurance” pool as everyone could at some point in their life need the “insurance” plus it’s the right thing to do.
d) All that said, instead of continuing to figure out how to grow S.S. and tax more, perhaps the focus should be on paying out less or none to people who will not need it in future years while still providing the “safety net” that FDR envisioned.
e) There also seems to be a psychological issue surrounding S.S. that needs a major shift. Presently it is something people look forward too and tend to lean on /overestimate the future benefit of as they make financial choices in pre- retirement life. Seemingly all too often they are disappointed after starting to collect S.S. then complain it’s “not enough”. In a true “insurance” paradigm, it really should be thought of as “I sure hope I never need this but it’s there if all does not go as planned”.
The noisy S.S. tax debate will decrease in volume-to some degree at least- when the system is not facing perpetual guaranteed payouts for all.
It would help if the government stopped “borrowing” (stealing) from the Social Security fund and leaving IOU’s. There shouldn’t be any cap on taxed wages.
The real fix is to grandfather everyone in who is on SS today or has started paying, and say that after a future date SS will end. All new workers will be automatically signed up for a diversified, opt-out, Roth IRA (you’re signed up automatically but have the option to quit).
If AI does take over and start doing all the jobs there should be an AI workers tax. That would go toward a guaranteed minimum income or lowering the work week from a 40 hour 5 day work week to 4 or 3 or even 2 days with a contribution toward the retirement Roth IRA. I’m sure corporations would scream bloody murder about that, but they did the same thing when the 40 hour 5 day work week was mandated.
SS has been funded the same way since 1936. Government never stole from the trust. That is an irresponsible thing to say.
The trust invests in special interest paying treasury bonds (an intergovernmental accounting entry). Interest to the trust was $69.1 billion last year.
Since 2021 those bonds have started to be redeemed. The interest paid plus now the redemption is why full benefits can be paid today.
After all the bonds have been redeemed by the trust (2034) and there is no more interest is when tax revenue will be sufficient to pay full benefits.
Opt out? You seriously think any opt out scheme will guarantee a life annuity in retirement plus all the other protections now provided by SS? What may seem logical on the surface needs a good dose of reality and human nature.
Dick,
Keep on correcting people about the “stolen” funds! 😁
It drives me nuts. What is posted on social media about SS is mind boggling and very sad.
I’ve read that is so!
😂
Frances Perkins FDR’s Labor Secretary and the first female cabinet member was instrumental in establishing the 40 hour work week, along with the minimum wage, unemployment compensation, worker’s compensation, child labor laws, Social Security, and more.
I learned about her years ago when watching an interview with her biographer. The most amazing woman of her time that few people know about except of course, at the time, my 90+ year old mother in law and her 90+ year old second husband. When I mentioned her name they immediately knew who she was, but she had been lost to history for the most part y future generations.
No cap on contributions no matter what your income. Over time continue to move FRA to 70. Cap benefits at some level ( not a math guru) indexed to inflation.
My proposed $100,000 cap on FICA wages for benefit calculation purposes may have a greater effect in improving funding than the CRFB’s proposal to cap household Social Security benefits at $100,000 a year.
Their proposal would leave the FICA wage base provisions unchanged, shifting the program into more of a welfare arrangement – disconnecting wages for tax purposes from wages for benefit calculation purposes.
CRFB asserts that their proposal would close 55% of the 75 year funding shortfall. https://www.crfb.org/sixfigurelimit
Why cap it at $100k? Why not $80k? Surely, a retired household can live on that. Half of America already does. Or, better yet, just make the benefit a flat number, regardless of how much you contribute?
I have my own ideas regarding Social Security reform – but because they require everyone to participate in the solution, including current retirees, either to pay more taxes or take less in benefits, I doubt anyone would ever approve such changes.
Trump Recommendation
With respect to an action the Trump Administration might take, here is what I think he should do. Once the Republican nominee for president is known, on or about September 1 2028, Trump could issue one of his infamous edicts and direct the Republicans in the Senate to filibuster the 2029 budget (upon threat of a veto) unless it included his Social Security “fix” – that would have four components:
So, instead of an employer contribution of $3,100 for someone with $50,000 of earnings in 2030 or $6,200 for someone with $100,000 in FICA wages in 2030, the new amounts would be $5,100, $10,200.
Those who have been paying FICA taxes on income > $100,000, every year since 2008, would have their benefits limited in the benefits calculation – for all who commence after January 1, 2030, and gradually, for all who commenced prior to January 1, 2030.
For most workers, the increase in taxes would be indirect, likely in the form of reduced wage increases in 2030 and 2031. For higher paid workers, they would see net pay increase (while Social Security benefits would decline). For retired higher paid workers, their Social Security benefits would be frozen for a period of time – shortest for those who only infrequently had FICA wages in excess of the wage base.
Trump would be able to claim he saved Social Security for all future generations (and just in time for the 2028 General election), while everyone else, especially Democrats would be able to blame him for increased FICA taxes, a la George H. W. Bush “read my lips no new taxes.” … while Trump will leave office January 20, 2029 before the new taxes take effect.
A la Shakespeare: “The evil that men do lives after them; The good is oft interred with their bones. So let it be with ‘Trump’.”
That would return Social Security, over the next few decades, to a program designed to minimize poverty in old age.
Or, if we do another iteration similar to the 1983 changes:
I would temporarily raise the tax rate in 2032 (creating a specific link between new taxes and benefit payments, confirming that we failed to properly fund the trust and that trust assets have been exhausted) so that inadequate revenue did not require a benefit cut – spread equally between worker and employer. The “surtax” would be recalculated every year and announced in November.
To match life expectancy, I would change the Normal Retirement Age from 67 to 70. Here is how: To change the Normal Retirement Age, 67 for people born after 1960, I would add three months per year, starting in 2028 (67 and 3 months for people born in 1961), and three months for every subsequent year until fully phased in of age 70 for those born in 1972.
I would also change the benefit formula to reflect the higher “normal” retirement age of 70, anticipating more years with wages. I would gradually change the number of years of earnings in the denominator from 35 to 50. Here is how. I would add one year to the denominator of the benefit calculation for each year starting in 2028, for 15 years, fully phased in at 50 years in 2042.
And, I would extend the 8% per year bump for delaying commencement from age 70 to age 75, so, an individual who would receive $1,000 a month at age 70 could delay and commence at 75 in the amount of $1,470.
And, to sell it, I would highlight just how little the worker paid in FICA taxes (relative to the benefits received). For all who retire in the future, I would change the taxation so that a worker receives his/her contributions, dollar for dollar, or penny for penny, tax free first. Then, once the employee contributions had been “refunded” (exhausted), I would confirm that and then take the same action regarding the employer contribution, taxable (as if it were a pension). And, then, once every dollar paid in on the worker’s behalf has been received (exhausted), the worker would receive a confirmation of that fact, and, that they are now being funded by other people’s contributions or earnings on trust assets.
Could you possibly make this any more complicated?
Unfortunately, I don’t think so. The compexity seems to be needed in order to accomplish all three goals:
(1) A change prior to 2032,
(2) Promise/guarantee to make the system indefinitely sustainable, and
(3) Return Social Security to its original goal of avoiding poverty in old age.
Would be happy to discuss simpler solutions – just don’t know any. In fact, my own preferred solution is even more complex.
The Trump “Savior” solution (identified above) is simplest and easiest to implement – as the D’s will very much enjoy pinning BOTH the benefit cuts and the tax increases on Trump.
Someone has to make suggestions, before we fall off the cliff. Ignoring the problem is not the answer. I do not have enough info to run the numbers, but a 30%+ increase is NOT a good idea. My take is, we live longer so raise retirement age to 70 or some correct calculated number, increase the tax rate 0.5%, tax all incomes no matter how high, and make some other changes to keep it solvent. Whatever is done will be a nightmare, but better than doing Nothing!
we need to get the very wealthy folks who receive no or very little in wages to contribute to SS.
I agree with RQ.
Wealthy or not, folks with no wages shouldn’t be required to contribute to SS system. There are other tax mechanism to shift wealth to support society.
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
Nick: Thank you for posting the gifted link to that NYTimes podcast; it was very thought provoking. I enjoyed it. 🙂
Happy to do it. I found it very insightful and wish more people understood our tax system
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.
That said, I do agree that this change by itself will not make SS sustainable. The real issue is that the ratio of the base of the pyramid (folks that work and contribute) to the top (folks that collect benefits) has decreased due to longer life spans, lower birth rates and (I think) lower (legal) immigration rates. As these demographic trends are unlikely to reverse any time soon, any solution to the parameters of the current system is likely to be a patch. We need some fundamental rethinking to make this system sustainable in the LR. I have some ideas but all of them have associated flaws as well.
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!
The tax rate you, and the rest of us, have been paying is 12.4%, no 6.2%. Whether that has been too low is highly debatable. That said, while increasing the tax to 16.2% would be unpalatable, it is the most honest solution. All others involve picking more winners and losers and increasing the unfairness of our tax code.
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.