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The only certainty about Social Security is that drastic changes will need to be made over the next decade to support the struggling program. What these changes might look like is less certain, although you can probably expect some form of tax increase and / or benefit reduction.
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As previously reported by GOBankingRates, a recent report from Social Security and Medicare administrators said benefits will need to be cut by 2034 – a year ahead of schedule – if Congress does not fix the deficit. long-term funding for the program. If Congress does nothing, the Combined Social Security Trust Funds will only be able to pay 78% of the benefits promised to retirees and beneficiaries with disabilities.
To fix the problem, Congress will need to make some major adjustments. Here are some possibilities:
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Higher income taxes for Social Security beneficiaries: Social Security benefits are subject to federal income tax if the combined income, including income from wages and other external sources, exceeds certain thresholds. Depending on your income and filing status, anywhere from 50 to 85% of your income may be subject to taxes, CNBC reported. Congress could increase these percentages to bring more money into the system.
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Higher social charges: Workers in the United States currently pay 6.2% of their wages to Social Security, a total matched by their employers. As of 2021, these payroll taxes only apply to annual salaries up to $ 142,800. This income limit could be increased to tax workers who earn well above $ 142,800. As CNBC noted, President Joe Biden has proposed to reapply the Social Security payroll tax for annual salaries above $ 400,000.
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Higher contribution limit: Another idea is to raise the contribution limit above 6.2%. Even a small increase would have a huge impact, given that around 176 million workers currently contribute to the system.
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Reduced benefits: The less popular alternative would probably be to reduce the amount of money Social Security pays out to beneficiaries, although this can save the system a considerable amount of money. In fact, younger workers can probably expect to receive less from Social Security than older workers, USA Today reported over the summer.
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Raise the retirement age at full rate. Depending on the date of your birth, the current full retirement age is between 66 and 67, according to the Social Security Administration. Congress could raise that age.
While these types of changes may take some time to implement, there is good news on a more immediate front: Social Security recipients should benefit from a major cost-of-living adjustment next year. to help them cope with high inflation. As GOBankingRates previously reported, the adjustment could reach 5.3% in 2022, which would be COLA’s biggest increase in more than a decade.
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This article originally appeared on GOBankingRates.com: How Social Security Could Change As Congress Reflects On Ways To Strengthen The Program
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