Here’s What the Average Senior Couple Collects in Social Security Today
The number may be smaller than expected.
Social Security is careening toward insolvency. The only question up for debate is when it will happen.
The federal program’s trustees stated in their 2022 update that Social Security’s combined trust funds would run out of money in 2035. However, less than two months ago, the Congressional Budget Office projected Social Security will become insolvent in only 10 years.
Contrary to some Americans’ fears, Social Security benefits won’t be cut off when the trust funds are exhausted. Payroll taxes at current levels should enable the program to continue paying around 80% of scheduled benefits.
Still, those steep benefit cuts would hurt millions of retirees. Politicians in both major political parties want to prevent this scenario from happening. Here’s how President Joe Biden and the GOP hope to avoid a Social Security fiasco.
Image source: Getty Images.
What Biden wants to do
President Biden hasn’t actually put forward a plan to preserve Social Security benefits. However, presidential candidate Biden did during his 2020 campaign. The most important proposal he made then to keep Social Security from going insolvent was to tax the rich.
In particular, Biden wants to make more wages subject to the Social Security payroll tax. Currently, Americans pay this payroll tax only on income up to $160,200. Under Biden’s campaign plan, any income above $400,000 per year would also be taxed.
One key downside to Biden’s proposal is that it won’t be enough to fix Social Security by itself. The Urban Institute’s 2020 analysis of the Biden campaign plan found that increasing the payroll-tax cap would only reduce Social Security’s long-term deficit by around 25%. And it would push back the program’s insolvency by only five years. However, another analysis conducted last year by the University of Maryland’s Program for Public Consultation determined that raising the payroll-tax cap to $400,000 would reduce 61% of Social Security’s projected shortfall.
Another problem relates to additional Social Security changes that Biden would like to make. He campaigned on increasing some benefits, as well as changing the way the annual cost-of-living adjustments (COLAs) are made. These proposals would greatly reduce the positive impact on preserving Social Security that increasing the payroll-tax cap would achieve.
What the GOP wants to do
Some individual Republican senators want to allow Congress to reauthorize Social Security either on an annual basis or every five years. Such a change would give Congress the ability to adjust Social Security spending, as needed. However, this idea hasn’t gained much traction among other GOP politicians.
But there are some proposals to preserve Social Security that have gained broader GOP support. The Republican Study Committee (RSC) includes 165 members of the U.S. House of Representatives. The RSC’s proposed 2023 budget features several ideas to keep Social Security from going insolvent.
Probably the most impactful Social Security change among the RSC’s proposals is to gradually increase the full retirement age from 67 to 70. The FRA would then be linked to the life expectancy of retirees. Only individuals currently under age 55 would be affected by the change.
This proposal has the same limitation as Biden’s plan: It won’t be enough by itself. An analysis conducted in 2022 by the Committee for a Responsible Budget found that increasing the FRA to 69 — one year lower than the GOP plan — would address roughly one-third of Social Security’s solvency gap.
The RSC proposed budget also would “make modest changes” to Social Security’s benefits formula for anyone age 54 and younger who retire early in 2030. The budget states that these changes would result in workers with lower average lifetime earnings enjoying higher benefits while slowing the growth rate in benefits for individuals with higher average earnings.
Again, though, the RSC recommends some benefits increases, including raising the minimum Social Security benefit. These proposals could offset the effect, to some extent, of the other ideas aimed at preserving Social Security.
Meet in the middle?
Clearly, President Biden and the GOP have different approaches to keeping Social Security from reaching insolvency. Perhaps the best alternative is for Democrats and Republicans to meet in the middle. A combination of their ideas could preserve Social Security for generations to come.
Retirees don’t have to worry about any changes in the immediate future. However, if the politicians in Washington don’t do something, a Social Security fiasco will be on the way within the next 10 years or shortly afterward.
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