Funding Social Security

As I read the 13-pager on how to fund Social Security written by the US Government Accountability Office (GAO), I found myself wondering how to distill the recommendations down. Some predictions are that Social Security might have to cut benefits starting in 2035...which is about the time I might claim benefits. As you can see guess, this is a topic near and dear to my heart and wallet. Anyhoo, here are a few thoughts from me on the topic. This is my attempt to summarize the 13 pages.

Funding Social Security sustainably requires a mix of policy adjustments and potential revenue enhancements. I dare say it also requires a bit of intestinal fortitude to make these happen.

Revenue-Based Solutions

1. Increase the Payroll Tax Rate Gradually raise the current payroll tax rate (currently 6.2% for employers and employees each) to generate additional funds.
2. Raise or Eliminate the Payroll Tax Cap Increase or remove the income cap on which payroll taxes are levied ($176,100 in 2025) to include higher-income earners.

Benefit Adjustments

1. Adjust Benefit Formulas Reduce benefits for high-income earners by altering the formula to make Social Security more progressive. Might it be that high-income earners are likely going to do OK on their own versus those at the other end of the income scale?
2. Raise the Retirement Age Gradually increase the full retirement age beyond the current 67 years for younger workers. This is an interesting proposal. Over 35 years in the industry, I have seen a marked increase in employees who state they will likely never retire (ie, sit on the couch all day, watching TV). Most want to stay active.

Alternative Funding Sources

1. Tax Additional Income Sources Apply payroll taxes to income not currently taxed, such as investment income or gig economy earnings.
2. Use General Revenue Supplement Social Security with funds from the general federal budget, financed by higher taxes or reallocation of spending. This to me speaks of a nation's priorities. I often wonder about sending money overseas when those same funds could be used here for greater local effect.

Incentivize Work and Contributions

1. Encourage Workforce Participation Create incentives for delayed retirement and higher labor force participation to increase the number of contributors. Given that delaying retirement is not always possible (ie, health challenges), this might need to be coupled with some sort of healthcare insurance reform.

I have seen some talk about privatizing Social Security or placing the funds into some kind of investments in an effort to try to grow the funds. I must admit to being leery of this based on what I have seen of unfunded or underfunded defined benefit/ pension plans.

The Parting Glass

Each of these solutions has trade-offs involving economic impacts, equity, and political feasibility. A combination of measures is likely necessary to balance sustainability with fairness. What is not a solution is just letting things run their course and hope the situation gets better.