9 Ways to Strengthen Social Security

How we got here​

One reason Americans get angry at talk of lower Social Security payments is that most of us have been paying into the system ever since our first jobs. And it’s not a trivial amount: Fully 12.4 percent of your gross income has gone to Social Security each paycheck by way of the Old-Age, Survivors, and Disability Insurance (OASDI) payroll tax.

If you work for someone else, it’s split evenly: You pay 6.2 percent of your income, and your employer chips in the other 6.2 percent. The self-employed pay the full freight. The amount of wages subject to the payroll tax is capped and adjusted annually for national wage trends. In 2023, a worker pays the tax on wages up to $160,200. For a self-employed worker clearing that amount or more, that means an annual OASDI tax bill of $19,865.​​​

After the Social Security Administration (SSA) pays beneficiaries, any tax dollars that are left over go into the trust funds (which peaked at about $2.91 trillion in 2021 and totaled $2.83 trillion at the end of 2022), to be tapped at a time when taxes coming into the system aren’t enough to cover ongoing benefit payments. ​

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That time is now. To make up for its income shortfall, the SSA has begun drawing on the trust funds. Based on recent calculations, absent any major changes, the funds will run dry in 2034. That’s 24 years earlier than the SSA estimated when the system was last overhauled in 1983.​

How did we get here? ​​As long predicted, demographics explain a good deal: In a decade, the entirety of the boomer generation — some 70 million Americans born between 1946 and 1964 — will have hit retirement age. As a result, the number of people receiving Social Security benefits come 2034 will be more than double the beneficiaries in 1985. ​​

But what wasn’t known as accurately was how much longer those boomers would live. “From 1940 to 2019, life expectancies at age 65 have increased by about 6.5 years,” says Amy Kemp, chair of the Social Security Committee of the American Academy of Actuaries.

The impact: Many workers will be receiving benefits for a longer period of time. And those with higher incomes, which are generally those who receive higher benefit amounts, tend to live longer on average. ​

​At the same time, there has been a continued decline in the nation’s birth rate; that means there are fewer younger workers to support the benefits promised to older workers. In 1955, there were more than eight workers supporting each Social Security beneficiary. Now there are 2.8 workers per beneficiary, and in 2035, the SSA projects, there will be 2.3.

Additionally, the country’s growing income inequality has had a negative effect on the amount of payroll taxes going into the trust funds, as wages above the payroll tax cap have grown much faster than wages under the cap. ​​

All this doesn’t mean that the Social Security program will end in 2034.

“People could be erroneously thinking that all benefits will be cut off at that point,” Kemp says. “But once the reserve is depleted, benefits will still be payable," though only about 80 percent will be covered by the payroll taxes coming into the system. And even if nothing is done, Social Security is projected to still be able to pay roughly three-quarters of promised benefits for the remainder of the century.​​

Every year, the trustees who oversee the Social Security trust funds issue a public report that updates projections for the program’s finances. It typically causes a flurry of foreboding news coverage, and 2022’s report, citing factors including the pandemic and the topsy-turvy economy, was no different. ​​

It’s no surprise that Americans are doubtful about the program’s future, particularly among millennials: Only 3 percent of Americans ages 30 to 49 are very confident in the future of the program, according to AARP’s 2020 survey. Adults born after 1981 “are more likely to assume future benefits will be nonexistent, while families who are five to 10 years from claiming Social Security assume benefits will be reduced or means-tested,” notes Cody Garrett, a financial planner in Pearland, Texas. ​​

Difficult choices​​

So what needs to happen to secure Social Security for the long term? There are variables that are out of the direct control of the SSA or Congress, such as the economy, wages, life expectancy and birth rates. But if projections hold more or less true, on paper the options are fairly simple: Congress will have to raise taxes, modify benefits or do some of both. Those options come down to any variation of a handful of leading approaches discussed by policymakers. Here are several, starting with ways to bring more money into the system.

• ​Adjust the cap. This year, someone with $1 million in work income would pay the same amount of OASDI tax as someone with $160,200 in wages. Eliminating the taxable wage cap would keep the trust funds solvent until 2060, according to Social Security. Other less-drastic approaches: Simply raise the cap to a higher level, or keep the cap but resume taxing after wages reach a new threshold.​​
• Increase payroll tax rates. ​​As noted, the current rate is 12.4 percent. Some propose raising that incrementally — say, by 2 percentage points, to 14.4 percent — as a way to bring additional dollars into the trust funds. But some experts note that such tax increases would be hardest felt by those who earn lower wages or are self-employed.​​
• Broaden the base. Not all state and local employees are covered by Social Security. Some have only public pension coverage. Bringing all newly hired state and local workers into the Social Security system would create a large new influx of cash, although it would mean more beneficiaries to pay later. But this isn’t a simple solution either, as the move could pose challenges to pension plans operated on behalf of local governments. ​​
• Broaden the definition of income. ​​Certain forms of income are not subject to SSA payroll taxes, such as the value of ​employer-sponsored group health insurance. Gradually eliminating such exclusions — and collecting payroll taxes on the additional income — would keep the trust funds healthy for roughly six additional years. A significantly larger target, and so more politically challenging, would be to levy a Social Security tax on annual investment income, as opposed to just payroll taxes. 

The other side of the coin is implementing changes that reduce benefits to certain Social Security beneficiaries. Here are several approaches that have been floated.​​

• Introduce more progressivity. ​​Typically referred to as “means testing,” this approach calls for adjusting the size of your Social Security payments based on your wages, wealth or income. The concept is to protect people below a certain annual income or wage level so they get full benefits; those who are financially healthier would sacrifice some or all of their Social Security payments. ​​
• Cut benefits for new recipients. ​​Another approach would be to pay newly eligible retirees a little less per month than promised. By cutting payments to new retirees by 5 percent, you extend the life of the trust funds to 2036, according to a 2022 study by the SSA. If your monthly payment was to be $2,000, a cut of that size would bring it to $1,900.​​
• Reduce the cost-of-living adjustment (COLA). ​​Each year, the SSA usually adjusts beneficiary payments to help protect their purchasing power from inflation. The yardstick used is the government’s Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which takes into account the price increases for everything from apples to gasoline to rent. Proposals have been floated to switch to different inflation measures, or simply to outright reduce the COLA. But doing so is highly unpopular. Social Security annual increases have long been below the general inflation rate, and reducing the annual COLA likely would have little impact on the long-term financial health of the program. But its impact on beneficiaries would compound over time, reducing benefits by a greater amount each year. ​​
• Change benefit calculations. ​Adjusting the complex formulas used to determine your Social Security payments could result in modestly lower benefits that could help increase the life of the trust funds. Here’s an example: The SSA uses your highest 35 years of salary history to determine your retirement benefit. Using a higher number of years, such as 38 or 40, would reduce a beneficiary’s average annual earnings and, as a result, the size of his or her monthly benefit. ​
• Up the retirement age. ​​You can start taking Social Security, with reduced benefits, at age 62. Wait until you’re 67 (if you turn 62 in 2022) and you qualify for your full benefit. Gradually increasing both (or just the higher) age thresholds would ease some of the strain on the trust funds. But it would also hurt those retirees who can’t wait longer to get Social Security. “There are a lot of jobs where people’s bodies just wear out,” says former Wisconsin congressman Ribble.

Protestors rallied against the privatization of Social Security on Capitol Hill in Washington, D.C., on Tuesday, April 26, 2005.

Then there are the more radical ideas

Some have suggested scrapping the entire program and converting it to individual account plans similar to a 401(k) retirement program, in which you contribute some or all of your current payroll taxes to a self-managed retirement account invested in stocks, bonds and other securities; you would bear the risks and rewards of your choices. ​

President George W. Bush proposed such a plan in 2005, but it was widely rejected by the American public. Experts also note that such a program would mean the trust funds would be depleted sooner, putting current benefits at even greater risk.​​

Getting it right​​

Legislators in Congress routinely propose bills to alter Social Security, ranging from small adjustments to substantive overhauls. In fact, in the 2021–2022 legislative session, dozens of members of Congress introduced bills related to Social Security. To date, none has moved to a full vote. ​​

This lack of action isn’t surprising, given Congress’ big disagreements on Social Security reform. The 1983 legislation negotiated between House Speaker Tip O’Neill and President Ronald Reagan that has kept the program solvent over the past four decades was a squeaker (though it ultimately won large bipartisan support). “The OASI trust fund actually reached the point where technically, it would have become depleted in 1982,” says Social Security chief actuary Stephen Goss. Fortunately, some technical maneuvers allowed full payments to be made until the Social Security Amendments of 1983 were signed into law. ​​

That bill gradually raised full retirement age for beneficiaries to 67, levied taxes on Social Security payments for some beneficiaries, and increased taxes, all of which would be difficult to reach consensus on in Congress today. ​​

Standing on one leg?​​

Americans rely on it. It’s long been cited that Social Security was meant to provide just 40 percent of your retirement income. But according to SSA data, 12 percent of men and 15 percent of women on Social Security rely on it for 90 percent or more of their income. Even a modest reduction in benefits would hit them hard. And 37 percent of men and 42 percent of women on Social Security get 50 percent or more of their income from the program. ​​

With around 66 million people today receiving benefits, that means tens of millions of Americans depend heavily on the program. And already, their payments aren’t high. The average retirement benefit from Social Security in February 2023 was about $1,831 a month, or just under $22,000 a year. The median rent for a one-bedroom apartment in the U.S.? Nearly $1,940 a month, according to Apartmentguide.com. ​​

“When I did my research on it, probably the hardest-hit recipient of Social Security was a widow who has outlived her family savings and is now living in old age, strictly on Social Security,” Ribble says. “She’s trying to live off a $700- or $800-a-month payment.”


Even though those who rely on Social Security alone are struggling, and the trust funds face depletion, neither are high enough on Congress’ radar to warrant action — yet. Still, if history is any guide, there’s reason to hope that Congress will find a solution. Says Social Security’s Goss: “We’ve never reached the point where we depleted the reserves and had to reduce benefits.”​​