Shoring Up Retiree’s Lifeline by Alyson Parker

It is no surprise to anyone that the Social Security and Medicare programs face significant challenges meeting their obligations to the nation’s seniors. The Trustees Report for 2024 was just released and starting in 2034, beneficiaries will only receive 79% of their earned benefits. Don’t expect Congress to address this mess this year since it is an election year, but clearly, they can’t ignore this growing problem much longer.

There are different proposals on the table to address the shortfall. One of them is to eliminate the taxable maximum so high-income earners would continue to pay the payroll tax all year. Currently, once a worker has paid SS taxes on $168,600 of their earnings, they are no longer taxed on anything earned above that tax.

Many feel that this is unfair since a worker making, let’s say $50,000 a year, pays a higher percentage of his wages into the program, so it is more of a burden for those lower income workers. If Congress eliminates the taxable maximum, the SS Trust Fund would be solvent until 2060.

Another proposal would be to reduce benefits. I can’t imagine that Congress would do this for a couple reasons. First, when the Social Security program was first created, it was envisioned that it would supplement a retiree’s savings and pension – some have referred to this as a three-legged stool. As we all know, traditional defined pension plans are being phased out by corporations so very few have them. As far as savings, we have all read about the savings crisis in America – 28% have savings below $1,000. Additionally, living solely off SS payments is hard for senior citizens who have faced increases in housing, food and medical costs.

Some have advocated for the retirement age to be increased. Currently, the full retirement age is between 66 and 67 depending on your birth year. There has been a proposal to raise it to age 69 for those born in 1965 or after. This solution also has drawbacks in that older individuals are the first to be laid off and are not the first to be hired because of their physical limitations. Additionally, for the many employees that have worked in physically demanding jobs, is it fair to ask them to work until they are close to 70?

Another idea that has been floated is to allow for more legal immigration which would increase the number of workers in the work force that would pay into SS. Back when the program was created there were 42 workers for every retiree receiving benefits. Now, because couples are not having as many kids and the baby boomers are retired or will be retiring soon, the worker/retiree ratio is down to three workers for every retiree.

Clearly, there is no easy solution for the politicians that want to keep their jobs. Typically, Congress waits until the crisis is at their front door before addressing it and this will probably be the case with Social Security.

NRLN believes that the best and fairest approach to shoring up the program is to raise the Social Security tax rate modestly for both the employee and employer and temporarily eliminate the taxable maximum so that all wages are subject to the tax until the Trust Fund is financially secure. Once the program is solvent, the tax rates and maximum wages taxed should be lowered to a level to maintain actuarial funding only. This is the best solution that is practical and ethical and keep the government’s promise to the American people.

We will continue to advocate to protect the program for all retirees and future retirees as well. This safety net is needed by all.