Social Security faces a looming financial crisis. According to the latest projections, the program’s “trust fund” will be depleted by 2033. If no action is taken, Social Security will only be able to pay 79% of scheduled benefits after that date.
Congress has recently made the situation worse by passing a bill that boosts benefits for retirees covered by other pensions. This legislation is expected to increase federal spending by around $20 billion per year over the next decade, further straining Social Security’s finances. Attempts to reform Social Security by trimming benefits or raising the retirement age have proven politically difficult.
Advocacy groups like AARP have successfully mobilized against even modest changes. Raising payroll taxes is also problematic because they are regressive, applying to the first dollar of income but dropping to zero for income above $176,100 in 2025. One potential solution is inspired by corporate pension buyouts.
In this plan, participants would forgo all future Social Security benefits in exchange for a gradual reduction in their payroll tax share.
Public backing for taxing wealthy more
Participants would be required to invest these tax savings to fund their own retirement.
This approach could be advantageous for younger, higher-earning workers, as the returns from personal investments could potentially exceed traditional Social Security benefits. However, the plan does have an initial cash flow drag for Social Security. For those not prepared to opt out, nothing needs to change; they can continue to rely on Social Security.
But by allowing those ready to take responsibility for their own retirement savings to do so, we can preserve Social Security for those who need it most and enhance the long-term fiscal health of the program. A new survey asked Americans what changes they would make to fix Social Security. Most respondents indicated they would be willing to raise taxes to keep benefits the same or increase them.
The most popular policy options were eliminating the payroll tax cap for individuals earning over $400,000 and raising the payroll tax rate from 6.2% to 7.2% for both employees and employers. Other favored changes aimed to make benefits more generous, such as adjusting cost-of-living adjustments and providing caregiver credits. Taken together, the changes selected by survey respondents would close Social Security’s funding gap.
The survey demonstrates that public support for Social Security remains strong, with people wanting to ensure the program is well-funded for future beneficiaries.