- Social Security
- What is Social Security?
- Who Pays for Social Security?
- Who Gets Social Security?
- What is the Social Security Retirement Age?
- How Do Benefits Compare to Earnings?
- The Role of Benefits in Income and Poverty
- Where Do Social Security Taxes Go?
- Social Security's Future Finances
- Public Opinions on Social Security
- How Will Boomers Affect Social Security?
- Social Security as a Share of the Economy
- Options to Balance Social Security Finances
- Proposals for Private Accounts
- How Would Money Be Paid Out of Individual Accounts?
- Children's Stake in Social Security
- Social Security and People of Color
- Women's Stake in Social Security
- Social Security, Marriage, and Divorce
- Social Security for Widowed Spouses in Retirement
- What is Social Security Disability Insurance?
- Key Dates in the History of Social Security
- About the Social Security Section of this Sourcebook
Print Entire Section
Options to Balance Social Security Finances
While Social Security is projected to run surpluses through 2020, the 2012 Trustees Report estimates that the program will be able to pay only 75 percent of benefits by 2033. To achieve solvency over 75 years, policymakers will need to choose between increasing revenues or reducing spending, or a combination of both steps.
Social Security has a long-run actuarial deficit equal to 2.67 percent of taxable payroll, according to the 2012 Trustees Report. This means that the deficit could be closed immediately if tax rates were raised from the 6.2 percent paid by both workers and employer (a total of 12.4 percent) to 7.6 percent each (or 15.2 percent in total). In other words, the deficit would be eliminated if workers and employers each paid 1.4 percent of wages more in Social Security taxes.
Options for increasing the system's revenues include:
- Raising the taxable earnings cap, which is $110,100 in 2012;
- Raising the Social Security tax rate in the future;
- Earmarking other taxes for Social Security in the future;
- Investing part of Social Security funds in equities; and
- Extending Social Security coverage to the 25 percent of state and local government employees not now covered
Options for lowering benefits include:
- Raising the eligibility age for full retirement benefits;
- Raising the eligibility age for early retirement benefits;
- Lowering the cost-of-living adjustment;
- Indexing benefits for new beneficiaries to keep pace only with price increases, instead of wage increases; and/or -Gradually scaling back benefits in a variety of other ways.
For a discussion of various solvency options, see:
- Social Security Benefits, Finances, and Policy Options: A Primer
- Fixing Social Security: Adequate Finances, Adequate Benefits
- Options to Balance Social Security Funds Over the Next 75 Years, Social Security Brief No. 18
- Building on Social Security's Success, A Briefing Paper
- Social Security: Options for Ensuring Solvency; February 25, 2005 Policy Seminar
- Children's Stake in Social Security, Social Security Brief No. 27
- Social Security: An Essential Asset and Insurance Protection for All, Social Security Brief No. 26
- Social Insurance Benefits Need Not Limit Economic Growth: New Evidence, Health and Income Security Brief No. 10
- Social Security and Retirement Income Adequacy, Social Security Brief No. 25
- NASI Member Social Security Sounding Board
Read what some NASI members think:*
- Laurence Seidman: "Social Security: What Now?" (4/11/05)
- Ed Welch: "A Solution for the Crisis" (3/11/05)
- Anna Rappaport: "Women are the majority of older Americans and many of them are alone" (2/4/05)
- Carmelo Mesa-Lago: "The Chilean Prescription Will Worsen US Social Security Ills" (1/11/05)
- Gerben DeJong: "Three-Legged Stool" (1/11/05)
- William J. Arnone: "Language and Labels" (1/11/05)
* The views of NASI members are their own and not an official position of the National Academy of Social Insurance or its funders.
