Friday, June 22, 2012

Social Security Fixes: Increase Taxes or Cut Benefits?

Photo by 401K2012
   
I’d rather blog about every other dimension of aging but finances, but I should probably annually revisit the topic of Social Security. Each spring, the Social Security Administration releases a report, which includes projections for how long the program will be viable. The most current report was released on April 25, 2012. 


The report itself is very detailed. You could read the entire report, read only the overview, or you could read one of many summaries / responses to the report. However, it’s challenging to find a summary that stays neutral. Be sure to look at the biases of the reporting organization.  I prefer looking at the Central Budget Office’s response, penned by one of the directors as a blog entry. It tends to focus on the numbers.

The current projections show that the retirement branch of Social Security will suffer funding problems by 2033.  The recession’s lower wages and higher unemployment made a significant dent in the health of this program. A lot can change between now and then, so I don’t view this date as set in stone.  


Some of the proposed reforms include some form of increasing taxes or reducing benefits:
  • Increase the cap so that the super wealthy pay in more. 
  • Increase the percentage of taxes paid into the system.
  • Tax state and federal workers. 
  • Tax more forms of income. 
  • Recalculate the COLA using a special senior index.
  • Deny full benefits until people are older by increasing the full benefit age to 68, 69 or even 70; doing this would make the early retirement age of 62 suffer even larger penalties.

AARP recently (which I found June 27, 2012) updated a list of possible reforms to include 12, more than I have listed above from synthesizing several sources.  These all may seem unacceptable, but we will have to adopt one, probably several, of these changes to the funding in order to keep the program viable. 

I am not advocating for any specific increase in tax or cut in benefit. I'm just listing some of them.  I suggest that you do more research yourself and decide how to lobby your lawmakers for changes to this program.  Make your voice heard. 

If you would like to enjoy the power of manipulating the funding for Social Security, check out the interactive graphic on AARP’s webpage. You can alter several variables to increase taxes and/or decrease benefits to see how they would affect the budget totals. 



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