Older people face Trump tariffs, leaving concerns are increasing, stock sales
Vicky Knight, a retired educator and part-time yoga instructor, says she feels she’s thinning. “I’m semi-retired,” Marietta, Georgia says her Social Security income is not enough to live, and recent stock market sales driven by tariff uncertainty have complicated her plans.
At this point, you may have heard rumors that Social Security is continuing to break. But thankfully, it’s completely wrong.
Social Security is not broken as you get a majority of your revenue from payroll taxes. So, as long as people keep their jobs down and continue to pay for the program, it could continue to be funded.
That said, Social Security is facing a serious income shortage as baby boomers are set in massive departures from the US workforce over the next few years, with insufficient number of alternative workers. However, once these trust funds are empty, Social Security may need to cut benefits.
And that scenario doesn’t seem to be decades away. If lawmakers manage to get in, it could be about ten years since they have looked at Social Security’s slash interests widely.
Thankfully, lawmakers have solutions that they can adopt with the goal of preventing widespread reductions in Social Security benefits. However, one popular solution could come with a world of repulsion.
Can lawmakers increase Social Security Tax?
There are many different measures lawmakers can take to increase their Social Security income. One is to raise the full retirement age by one or two years so that workers will have to wait longer to collect their monthly benefits without reducing.
Another option is to raise the Social Security Tax. But that’s not what workers want. And, not surprising, they are very concerned about lawmakers going down that path.
A recent survey by the Employee Benefits Institute said 39% of workers are worried about an increase in social security tax. That’s understandable given that many Americans feel they owe taxes to begin with.
What will the increase in social security tax look like?
Lawmakers have several options to raise Social Security Tax. First, you can increase the Social Security tax rate. Alternatively, you can raise the Social Security wage cap.
Currently, workers pay a 12.4% tax rate for social security purposes. Of that, half of it will leave your salary and the employer will pay the rest. However, self-employed people must cover the entire Social Security tax of 12.4%.
It is possible for lawmakers to choose to raise their tax rate to a number above 12.4%. If so, it would be almost burdensome if all members of the workforce had heavier taxes.
Meanwhile, the Social Security wage cap is currently at $176,100. This means that workers with high incomes will not pay the program beyond their revenue threshold. If lawmakers raise wage caps, higher-income people will pay Social Security taxes on more income. And if lawmakers completely eliminate wage caps, the higher earners will pay Social Security in every dollar they make.
It may seem like a better solution as raising or removing wage caps only affects higher incomes. However, this option introduces a challenge that lawmakers may struggle with managing.
Social Security pays the maximum monthly benefits based on wage caps. It is not fair to raise wage caps without increasing the program’s greatest profits. However, in that case it is unclear how much revenue the program will generate.
Either way, lawmakers need to do something to prevent social security cuts. Whether that means hiking the Social Security Tax is still in the air. But that is a change that workers may have to support.
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