The Future of Social Security: What Can You Expect If You Are Already Retired?
One thing that’s almost certain about the future of Social Security is that younger workers won’t get the same benefits their elders did. Only 3% of Americans ages 30 to 49 are “very confident” in the future of the program, according to a 2020 survey from the AARP. Americans who are already retired are less pessimistic about Social Security, though many worry about the program’s future.
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That mainly has to do with the Old Age and Survivors Insurance Trust (OASI) fund, which is expected to run out of money within the next decade. If U.S. lawmakers can’t come up with a way to fix the shortfall, it could result in benefit cuts of up to 24% for retirees.
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That’s a troubling scenario, considering how many Americans depend on Social Security.
At the end of 2022, nearly 67 million individuals received a monthly Social Security check, according to the Social Security Administration. The agency found that 12% of men and 15% of women on Social Security rely on it for 90% or more of their income. More than four in 10 women (42%) depend on Social Security for 50% or more of their income, while 37% of men do.
Proposals to fix the program before the trust fund is depleted usually fall into two camps: either cut or privatize benefits to keep it financially solvent, or raise Social Security taxes to protect benefits. Because these ideas usually fall along strict partisan lines, getting either approved by Congress and the White House is a tough ask.
This is not necessarily a new problem, though it has taken on heightened urgency because of the looming OASI shortfall. Changing Social Security is “really, really hard,” according to Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League, a non-partisan advocacy group.
“I think it fair to say that our elected lawmakers have periodically debated Social Security reform for as long as I’ve been writing about Social Security, and that’s nearly 30 years,” Johnson wrote in an email to GOBankingRates. “The retirement and survivors benefits programs look pretty much the same as back when I started, and so does the taxation of wages.”
Even so, there is plenty of concern about the program’s future among current retirees.
A new Retirement Survey by The Senior Citizens League asked respondents to list their top retirement concerns. Most respondents (61%) said they expect Congress and the president to enact legislation that cuts Social Security benefits. About one-third expect to see legislation requiring retirees to pay a higher tax rate on Social Security benefits or retirement income.
At the same time, 83% of respondents think Congress should increase revenues received by Social Security to resolve the funding imbalance, Johnson said. Because there is such massive support for protecting benefits among seniors — and because seniors make up such a powerful voting bloc — Johnson holds out hope that Social Security might be bolstered through higher taxes.
“Congress may find consensus to make changes that would, for example, apply the 12.4% payroll tax to all earnings instead of capping the amount of earnings subject to taxation at $160,200,” she said. “In addition, Congress may also discover support for applying the payroll tax to net investment earnings of high-income individuals.”
There’s also the possibility that current retirees will see a change in the formula to calculate annual Social Security cost-of-living adjustments (COLAs) to better reflect the financial needs of seniors.
“We believe the program can be made more adequate and provide a more representative COLA through changes that would make payroll taxes more equitable,” Johnson said. “A lot will depend on our makeup in Congress. Older voters have so many distractions that have no bearing at all on the much more important question of whether our Congress can effectively govern and address issues such as Social Security solvency.”
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This article originally appeared on GOBankingRates.com: The Future of Social Security: What Can You Expect If You Are Already Retired?
