Social Security is a crucial financial lifeline for over 70 million Americans, including retirees, disabled individuals, and dependents. However, the program faces a significant financial shortfall, and if no action is taken, the trust fund could be depleted by 2035. This would result in a 17% cut in benefits, leaving millions of Americans struggling to make ends meet.

One of the biggest reasons for this looming crisis is the changing demographics in the U.S. As the population ages, there are fewer young workers contributing to the system. Additionally, recent policies, such as the Social Security Fairness Act (SSFA), are adding financial strain by increasing benefits for some public pensioners, accelerating the depletion of funds.

With these challenges ahead, lawmakers and experts are debating various solutions to keep Social Security financially stable for future generations.

How Can Social Security Be Saved?

1. Raising Taxes and Boosting Revenue

The U.S. Government Accountability Office (GAO) has suggested a mix of raising payroll taxes and reducing costs. By increasing payroll tax revenue and adjusting benefits, the government could extend Social Security’s lifespan without drastic cuts.

One proposal from economist Wendell Primus suggests:

• Increasing the taxable wage base from $176,100 to $300,000.
• Raising the payroll tax from 12.4% to 12.6%.
• Taxing benefits as income for those earning over $100,000.

These changes could generate billions in additional revenue to support the Social Security trust fund.

2. Changing Retirement Age and Benefit Calculations

Some experts believe increasing the full retirement age is a necessary step, as life expectancy has risen over the years. Other proposed changes include:

• Extending the calculation period for Social Security benefits from 35 years to 40 years.
• Phasing out dependent spouse benefits as more women are in the workforce and earning their own Social Security.

These measures would reduce the overall payout while ensuring that Social Security remains sustainable.

3. Redirecting Taxes and Reforming Funding Policies

Another suggestion is to ensure that all taxes collected from Social Security go directly into the program’s trust fund, rather than being redirected to other government programs like Medicare. By keeping Social Security taxes dedicated solely to retirement and disability benefits, the fund could remain solvent for a longer period.

Additionally, adjusting immigration policies to allow more workers to contribute to Social Security could help balance the worker-to-retiree ratio. More workers paying into the system would generate additional revenue, offsetting some of the financial shortfall.

Should 401(k)s and IRAs Be Abolished?

A controversial proposal from retirement experts Alicia Munnell and Andrew Biggs suggests eliminating tax-sheltered retirement savings plans like 401(k)s and IRAs. They argue that these programs disproportionately benefit wealthier individuals while reducing federal tax revenue. By reallocating the funds from these tax breaks into Social Security, they claim the program could be strengthened without requiring benefit cuts or tax increases.

However, critics argue that eliminating 401(k)s would hurt middle-class Americans who rely on these savings for their retirement security. Many believe that instead of removing these plans, Congress should look for alternative ways to generate revenue.

Do Americans Support Higher Payroll Taxes?

Raising taxes is often unpopular, but when it comes to saving Social Security, many Americans are on board. A recent survey by the National Academy of Social Insurance and AARP found that 85% of Americans support higher payroll taxes if it means keeping Social Security benefits intact.

Key findings from the survey:

• Most Americans (across political parties and income levels) believe Social Security is essential for retirement security.
• A majority support removing the income cap on payroll taxes for those earning over $400,000 per year.
• Many are open to gradually increasing payroll taxes to strengthen the system.

On the other hand, Americans overwhelmingly oppose raising the retirement age or switching to a slower cost-of-living adjustment (COLA).

The Urgency to Act Now

The financial gap in Social Security is not a problem that can be ignored. The Peter G. Peterson Foundation has highlighted that delaying reforms only makes the situation worse. If Congress had addressed the issue in 2010, the necessary changes would have been much smaller compared to the drastic actions required today.

To prevent future retirees from facing benefit cuts, lawmakers must act swiftly. Whether it’s increasing payroll taxes, adjusting benefit calculations, or reforming tax policies, there are multiple options on the table.

Final Thoughts

Social Security has been a backbone of financial security for American retirees since the Great Depression. With millions relying on it for their livelihood, ensuring its solvency is a national priority.

While there is no single perfect solution, a combination of revenue increases and gradual cost adjustments could help protect Social Security for future generations. The good news is that Americans are willing to support changes that strengthen the system—now it’s up to policymakers to take action.

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