((News) – Social security is an essential source of income for millions of Americans, but after 90 years the program faces itself Significant financial challenges That could change it for future generations.
If the congress does not act, the pensioners could be reduced by 23% in less than a decade and thousands of dollars could be canceled from the annual advantages of the average person.
It is unlikely that the legislator will let this happen, but so far they have decided to get the can on the way to avoid politically unpopular solutions and make any corrections hard.
President Franklin D. Roosevelt signed social security in the law On August 14, 1935 to “grant the average citizen and his family a certain level of protection against the loss of a job and against the age characterized by poverty”.
Here is what you should know about the status of the program 90 years later.
How many people do social security receive?
Almost 70 million people received social security benefits In JulyWith an average check of $ 1,863. The retired workers made the largest share of three quarters or around 53 million.
The program also supports other groups: almost 6 million people have received Surviving advantages Last month, while more than 8 million disabled insurance were collected.
Most people aged 65 and over receive them Most of your income For social security, it is an essential lifeline for millions of adults – and children – that would otherwise fall below the poverty border.
Without social security benefits, 37% of the older adults had had income below the official poverty limit in 2023. Instead, only 10%did, According to the Center for Household and Political Priorities.
More Americans now expect to rely on social security than in the past. In A The youngest Gallup survey37% of the non-Retires stated that it will be a “main source” of retirement income-compared to 28% two decades ago.
If social security benefits could be reduced
social security Doesn’t go awayBut in less than a decade, millions of Americans were able to shrink their monthly pension tests if the congress does not intervene.
The retirement trust find of the program is expected to be expected go out until 2033At this point, social security would only be 77% of the promised services.
For today’s average retired workers, this would mean a reduction of around $ 460 per month -more than 5,500 US dollars a year.
That is, experts Beware of it Fearing that the program may not be there in the future, social security benefits will lead prematurely, as this leads to permanently lower monthly checks.
The federal legislature is expected to act before the effects of the cuts. The longer you wait, the more complicated the solution becomes.
Social security is largely supported that politicians have so far largely avoided the movements that the voters could prove unpopular.
The last major overhaul came about 40 years ago when the federal government gradually increased the gradually increased Full of retirement age From 65 to 67. When this happened in 1983, the social security bankruptcy was Just a few months away.
Why social security is exposed to a financial deficiency
The financial lack of the program is largely based on the changing demography of the country, which means that fewer employees support more pensioners.
In 2010, 43 million people aged 65 and over and 59 million by 2024. According to Peter G. Peterson Foundation. At the same time, the number of employees who contribute to the program – from 2.9 employees covered per beneficiary in 2010 to 2.7 in 2024 – a relationship that is expected to go back to 2.3 by 2044, said the foundation.
This imbalance is a problem because social security is primarily financed by a salary account tax About 90% of the income of the trust fund. Fewer employees mean fewer income tax revenue.
The good news is that the demographic shift is not a surprise, which gives political decision -makers time to prepare. The bad news is that it is not easily the other way round and may be necessary to change the guidelines to support the program for the coming generations.
Something else that should be considered: Despite the raise in the income limit over time, a lower proportion of wages are now subject to wage tax compared to the 80s and 90s. The part of wages and salaries covered by the salary billing tax fell to about 82%, compared to 90% in 1983. According to the tax foundation.
Part of this is due to an raise in the services provided by employers such as health insurance, which can be tax deductible and are therefore not confronted with income or income tax, the tax foundation said.
What can be done to fix social security?
The legislator has some options: increasing social security income, they reduce the costs or most likely a combination of both.
Democrats want collect more money By paying high earners who pay social security taxes on income above the current upper limit. For 2025, the tax only applies to the first $ 176,100So all the earnings above that are not taxed.
The gradual raise in wage and salary account tax rate is another way to raise income. At the moment the Tax rate for social security is 12.4% overall, evenly divided between employees and employers with 6.2% each. The combined rate was constant Since 1990.
While the raise in taxes is rarely popular, Surveys suggests Increasing the income is generally more acceptable to the public than reducing services.
A 2024 Pew Research Survey found that vast majorities of both Republicans (77%) and Democrats (83%) support no reduction in social security.
President Donald Trump has repeatedly promised not to reduce social security benefits and even suggested Elimination of federal income taxes In the case of pension tests, this step would worsen the financial lack of the program.
Like his predecessors, Trump offered a little concrete political instruction for determining social security. Elon Musk’s efforts to exterminate widespread waste, fraud and abuse Legend to expectations And caused considerable confusion.
At the beginning of this year, Brooking A Non -partisan blueprint To remedy social security. The proposal included tax -based sales increases such as increasing the maximum tax limit and increasing the salary account tax from 12.4% to 12.6%. It also indicated performance reductions, such as increasing the retirement age for high earners.
