Social Security is a really popular entitlement program and Americans want to preserve it for future retirees. But that doesn’t mean people aren’t open to changes.
In fact, a recent survey conducted by Nationwide found there are several reforms that the majority of Americans support. Here’s what they are.
1. Ensuring COLAs keep pace with true inflation
Nearly 9 out of 10 survey respondents said they supported a change to Social Security’s periodic raises. These raises, called cost of living adjustments, or COLAs, are supposed to ensure benefits retain their buying power. That hasn’t happened, with Social Security benefits losing around 30% of their value over two decades.
The current COLAs are based on price changes tracked by the Consumer Price Index for Urban Wage Earners and Clerical workers. So, it’s not a surprise they don’t accurately measure the increase in senior spending — or that a majority favors shifting to a different approach to calculating benefit increases.
2. Taxing higher earners more to support Social Security
Shoring up Social Security by taxing the wealthy is enormously popular, favored by 79% of survey respondents. This was proposed by President Joe Biden who pledged to impose new Social Security taxes on people making more than $400,000.
But it’s not as straightforward as it seems. See, right now, taxes are directly linked to benefits. Workers pay taxes on income up to a certain limit (called the wage base limit), and their benefits are based on their average taxed wages in their 35 highest-earning years.
While higher earners don’t pay taxes on wages above the limit, those wages also don’t result in larger retirement benefits for them. If retirees were taxed more without a corresponding increase in benefits, this would fundamentally change Social Security from an entitlement program and could erode its broad support.
3. Providing a Social Security credit to unpaid caregivers
Because Social Security benefits are based on average wages over 35 years, those who do unpaid work for periods of time may see smaller benefits — or may not even qualify for Social Security based on their own work history. Around 74% of people want to change that, by giving Social Security credits to those who provide care but don’t work for pay.
The logistics of this could be a challenge, though, and this could worsen Social Security’s funding problems because people would no longer get benefits tied to the money they paid in.
4. Providing COLAs only to middle-income or low-income households
Although most people believe COLAs should be increased, a majority also believe not everyone should benefit from them. In fact, 64% of survey respondents said they’d support these periodic raises going only to low- and middle-income households. This would mean that wealthier Americans would see the value of their benefits fall over their retirement as inflation eats away their buying power.
5. Eliminating the cap on payroll taxes
Eliminating the cap on payroll taxes would also have the effect of wealthy people paying more for Social Security. It would eliminate the wage base limit, so every American would owe payroll taxes on all their earnings.
This approach is supported by 63% of survey respondents. But, again, this raises the question of whether wealthier people who are taxed on more of their income would also see higher benefits as a result. If not, turning Social Security into a redistributionist program could potentially impact public perceptions. On the other hand, if wealthy people did end up with much higher benefits because they were taxed on all their earnings, this wouldn’t necessarily improve Social Security’s funding issues.
6. Privatizing part of Social Security benefits
Privatizing part of Social Security benefits means allowing Americans to keep more of their money to invest for retirement on their own, rather than paying as much into Social Security.
It receives support from 58% of survey respondents. But past attempts at privatization have not been popular and there’s a risk people would mismanage the money and end up with too little retirement income to live on.
7. Means-testing benefits
Finally, means testing benefits is supported by 58% of survey respondents. If this were implemented, everyone would continue to pay into Social Security taxes, but only people with incomes below a certain threshold would actually receive retirement benefits. This could also undermine the near-universal support Social Security enjoys, and would fundamentally change the structure of the entitlement benefit.
Ultimately, some of these reforms may be considered, but, despite the fact that they have broad support, most are unlikely to actually become law due to logistical difficulties or the challenges in changing one of America’s most beloved government benefits.
The $16,728 Social Security bonus most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,728 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.
The Motley Fool has a disclosure policy.