Patrol the halls of Congress and you’d be hard-pressed to find any lawmaker that knows what is being done to fix the Social Security financing gap. As it stands right now, there will be enough funds available to pay out full Social Security benefits for the next 20 years only.
But a new study finds that the public is very clear on a solution. The majority of Americans are willing to increase the Social Security wage tax in order to extend benefit coverage out to 75 years, and also improve benefits along the way.
That is a key finding of the new study, “Americans Make Hard Choices on Social Security: A Survey with Trade-Off Analysis,” recently released by the National Academy of Social Insurance, a nonprofit, nonpartisan organization made up of leading experts on social insurance.
According to Virginia Reno, the academy’s vice president for income security policy and co-author of the study, its purpose was to seek a most-desired solution directly from the public. So survey participants were presented with a variety of 12 options that would each take a different path toward the same end game: funding benefits for a period of 75 years.
The trade-off exercise allowed participants to choose among different packages of Social Security changes, the report highlights explains. They could weigh how each policy change would affect workers, retirees, and the program’s future financing gap.
“In the trade-off analysis, we included 12 different policy changes. Four were revenue increases. Four were benefit reductions. Four were benefit increases,” Reno said. “The one that was favored by seven out of 10 respondents would gradually increase [Social Security] taxes in two ways.”
First up is gradually – over 10 years – phasing out the cap on earnings below which Social Security wages are levied. That is currently $117,500, and increasing to $118,000 in 2015. In this option, 6 percent of workers who earn more than the cap would pay into Social Security all year, as other workers do, and in return would get slightly higher benefits.
The second part involves gradually – over 20 years – increasing the contribution rate from 6.2 percent to 7.2 percent for both workers and employers alike. This part of the plan wouldn’t start for another five years, but once in effect would increase Social Security tax withholdings by 1/20 of 1 percent each year for the 20 years. A worker earning $50,000 annually would pay an additional 50 cents per week into Social Security, as would their employer.
A third feature of this most-popular option would increase Social Security’s cost-of-living adjustment to reflect actual inflation.
A fourth element would raise Social Security’s minimum benefit so that anyone who pays into Social Security for 30 years would be eligible to retire at age 62 or later, and be guaranteed benefits above the federal poverty level.
Whatever You Do, Don’t Touch our Benefits
The study is actually the second time the academy has polled the public on its views of Social Security and options for bolstering the system. The first study results were released in January 2013. There will few differences in the results both times.
“It’s quite consistent across the various aspects of the survey that people value the system; they have favorable views of Social Security; they value what it does – both for people they know and in the hope they get it themselves someday,” Reno said.