While Social Security’s income is projected to exceed outgo through 2021, the 2017 Trustees Report estimates that, after the Trust Fund assets have been depleted in 2034, the program will be able to pay only 77 percent of benefits thereafter. To fully finance benefits 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 of 2.83 percent of taxable payroll, according to the 2017 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 7.7 percent each (or 15.4 percent in total). In other words, the deficit would be eliminated if workers and employers each paid 1.5 percent of wages more in Social Security taxes.
Options for increasing the system’s revenues include:
Raising the taxable earnings cap, which is $127,200 in 2017;
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:
Further 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
Gradually scaling back benefits in a variety of other ways.
In addition, a number of other policy options would make benefits more adequate for specific vulnerable populations. Those options include:
Updating the special minimum benefit for low-serving, low-paid workers;
Reinstating student benefits up to age 22 for children of disabled or deceased workers;
Increasing benefits for those aged 85 and older; and
Allowing childcare years to count towards Social Security benefits.
For a discussion of various solvency and adequacy options, see: