Congress Needs to Agree on a Bipartisan Solution to Protect and Save Social Security

We'll never stop fighting to protect this earned benefit, but Congress must act to make sure Social Security can pay the full benefits Americans have earned. In Idaho, there are more than 370,000 Social Security recipients who depend on this program. The following list provides an overview of the commonly discussed changes Congress is expected to consider as part of a larger package.

HERE ARE SOME OF THE OPTIONS PEOPLE ARE TALKING ABOUT:

Eliminate or raise the wage cap: Social Security taxes are only paid on the first $168,600 of wage earnings in 2024. Any earnings above this threshold, known as the taxable maximum, are not subject to the Social Security payroll tax. The taxable maximum is automatically adjusted every year based on overall wage growth in the economy. Various proposals would help close the shortfall by either removing this cap altogether or setting it higher to capture the large amount of wage growth above the cap. Most of these proposals would increase benefits to reflect those higher earners’ contributions, but at a lower rate of return.

Increase the payroll tax rate: Employees and employers each pay a 6.2% payroll tax on the first $168,600 of annual wages. This is part of the FICA tax on your paycheck. One way to help close the Social Security funding gap would be to increase the 6.2% payroll tax on all employees and employers. Various proposals would phase in this increase over time, increasing both the employer and employee share of the payroll tax.

Use Other Funding: By law, Social Security is a self-financed program paid for by a 6.2% payroll tax on both employees and employers (or 12.4% for the self-employed). Currently, the program is largely self-funded, which means Congress does not appropriate funds nor are general revenues used to pay Social Security benefits. Various proposals include:
• Congress could use money from the general fund to help pay benefits.
• Congress could tax other forms of income such as investment income to reach workers who do not earn income through wages.
• Congress could create a new fund to invest in the private market to help pay benefits as this new fund grows over time. Lawmakers could borrow initial deposits which could be paid back at a later date.

Raise the Full Retirement Age: Many Americans are living and working longer. One option would raise the full retirement age to anywhere from 6870. The current full retirement age is 67 years old for people who turn 62 in 2024. Most proposals phase this change in over time and seek to protect those currently at or near retirement from any increase in the retirement age. The early claiming age of 62 would still be preserved, which is important for those who do arduous work or have health or caregiving challenges. However, for every year the full age is increased, claiming at 62 would result in a roughly 6% benefit cut. Additionally, because of the long phase-in time, savings to the program would likely not take effect for several decades.

Reduce benefits for the upper income: Social Security is set up so that while people with lower wages throughout their careers receive lower benefits, they get a larger amount of their contributions back in retirement than those with higher incomes.
• Some proposals would change the benefit formula to return even less money to those who earned more during their lifetimes.
• Another approach would be some form of means testing, which would base the person’s benefit on the income and/or assets at retirement, as opposed to what the person paid into the system during his or her career

AARP’s Social Security principles:
• Any process for looking at Social Security options should be transparent and provide substantial opportunities for input from the public and outside organizations.
• Any proposals must reflect today’s changing workforce and the dynamic economic and demographic shifts that make it harder for workers to save enough for retirement.
• All legislation to adjust Social Security should go through the regular order of congressional business and be done outside the context of debt reduction.
• We oppose proposals to “sunset” all or part of Social Security that would require reenactment every few years, which would threaten earned benefits.