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It's Time to Protect Social Security

The longer we wait, the harder it gets. Here are possible solutions from both sides of the political aisle

The Social Security Playbook illustration

Changes are needed to restore Social Security to long-term fiscal health. — Illustration by Pete Ryan

It's Time to protect Social Security logo

 

THE OPTIONS
 
There must be 50 ways to fix Social Security, or at least a dozen. But most potential solutions fall into two main categories: Raise more money, or adjust benefits.
 
Option 1: Raise revenue
 
Raise the cap on income subject to FICA taxes, now set at $106,800. Lifting the cap to cover $190,000 of income closes 31% of the gap, according to an AARP analysis; complete removal closes 99% of the shortfall.
 
Raise the payroll-tax rate on employers and employees. An increase to 6.7% from the current 6.2% eliminates half the shortfall.
 
Broaden the base of income subject to FICA taxes, such as tax-excluded health benefits and flexible-spending accounts. This closes 11% of the gap.

Option 2: Adjust benefits

Raise the retirement age. A gradual increase from 67 to 70 by 2040 would close 65% of the gap.

Index benefits for longevity by paying lower annual benefits as average life expectancy increases. This closes 21% of the gap and maintains similar total lifetime benefits for each generation. (But lower-income Americans, who have shorter life expectancies, would receive a bigger benefit cut.)

Change the formula for the annual cost-of-living adjustment (COLA). President Obama's deficit commission recommended using a new inflation measure called the "chained" Consumer Price Index, which tends to rise more slowly than the index now used to compute Social Security's COLA.

Option 3: Private accounts

President George W. Bush's proposal in 2005 to partially privatize Social Security by creating IRA-style retirement accounts was defeated, but a small contingent of policymakers and politicians continues to argue for partial privatization or even elimination of Social Security altogether.

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