6 Social Security Changes Americans Hope to See

Social Security is facing a significant financial crisis, with an estimated shortfall of nearly $23 trillion over the next 75 years, according to the most recent Trustees Report. The latest projections suggest that the program’s trust funds may be depleted within the next decade.

In the worst-case scenario, beneficiaries could see a nearly 25% reduction in their benefits. However, such a drastic scenario is not expected to happen immediately.

Over the years, government officials have presented various proposals aimed at increasing Social Security’s funding.

While none of these proposals have gained significant momentum, it is expected that the urgency and number of these suggestions will grow as the depletion date of the trust funds approaches.

A Potential Solution to Social Security’s Shortfall

Despite the complexity of the issue, a recent National Academy of Social Insurance (NASI) survey has proposed a potential solution.

This plan not only addresses the funding shortfall but also includes beneficial improvements to the program.

More than 80% of survey participants supported a comprehensive package of six proposed changes, which could be vital in keeping the Social Security system solvent.

Key Proposals to Strengthen Social Security

1. Expanding Payroll Taxes for High Earners

A major suggestion in the NASI survey was the creation of a “donut hole” in Social Security payroll taxes. Currently, taxes are levied on earnings up to $176,100 (as of 2025), and earnings above that threshold are not taxed for Social Security purposes.

The proposal would maintain this cap and not tax income between $176,100 and $400,000. However, income above $400,000 would become taxable.

This measure could help boost the program’s finances while only affecting high-income earners who do not gain additional Social Security benefits for the extra taxes paid. Over time, as the cap increases, the donut hole would eventually disappear by 2048.

While this proposal would help most Americans who don’t earn enough to reach the cap, it is expected to be unpopular among high earners, especially given the lack of an increase in benefits.

2. Gradually Raising Payroll Tax Rates

Currently, the Social Security payroll tax stands at 12.4%, split equally between employees and employers. For self-employed individuals, they pay both parts but receive a tax deduction for half of what they pay.

The proposal suggests gradually increasing the tax rate from 6.2% to 7.2% for both employers and employees. This would result in an additional 1% of income going to Social Security, equating to an additional $42 per month for someone earning $50,000 annually.

3. Adjusting Cost-of-Living Adjustments (COLA) for Seniors

The COLA is used to adjust Social Security benefits to account for inflation. However, the current COLA formula is based on spending patterns of urban wage earners and excludes retirees. Many retirees have long argued that this method does not accurately reflect their spending needs.

A proposed change would see COLAs based on the Consumer Price Index for the Elderly (CPI-E), which accounts for the unique spending habits of seniors. While this would likely result in larger COLAs, it would also increase the program’s costs, requiring additional funding to maintain financial balance.

4. Introducing a Caregiving Credit

Social Security benefits are calculated based on a person’s highest-earning 35 years of work, adjusted for inflation. Individuals who take time off to care for children (often women) see a significant reduction in their future benefits.

The proposed caregiving credit would help mitigate the negative impact of these caregiving years. This would provide those who step away from the workforce to care for children under six with credit towards their Social Security benefits, helping prevent substantial reductions in their retirement income.

5. Creating a Bridge to Benefits for Older Workers with Physically Demanding Jobs

Workers in physically demanding roles often claim Social Security benefits early, at full retirement age (FRA), typically between 66 and 67 years. However, claiming early results in a permanent reduction of up to 30% in monthly benefits.

A proposal from the NASI survey suggests that the early claiming penalty could be reduced for workers in physically demanding jobs, allowing them to retire without losing a significant portion of their lifetime benefits. This would help older workers who may no longer be able to perform their demanding jobs due to physical strain.

6. Reducing Benefits for High-Income Retirees

The final proposal includes a reduction in Social Security benefits for high-income retirees. Specifically, retirees with incomes exceeding $60,000 (individuals) or $120,000 (couples) in retirement, excluding Social Security, would face reduced benefits.

The rationale is that these individuals likely have more personal savings and are better able to support themselves without a full Social Security payout.

While this idea has not gained widespread support, it would likely impact middle and high-income earners, leading to a potential reduction in benefits for many retirees.

The Future of Social Security: Will These Changes Be Adopted?

The proposals outlined above represent one potential pathway to resolving Social Security’s funding crisis. However, the outcome remains uncertain, and the government will need to carefully weigh all available options.

Whatever solution is ultimately adopted, it will be crucial for both workers and seniors to prepare for potential changes to how Social Security benefits are delivered in the future.

Social Security’s funding issues present a significant challenge, but proposed changes offer hope for securing the program’s future.

By addressing funding gaps through payroll tax adjustments, gradual tax increases, and modifications to how benefits are calculated, Social Security can continue to provide vital support to future generations.

However, these solutions will require careful consideration and implementation to ensure long-term financial stability for all beneficiaries.

FAQs

What is the current shortfall in Social Security?

The Social Security program is facing a shortfall of nearly $23 trillion over the next 75 years, which could deplete its trust funds in under a decade.

How would the payroll tax changes affect high earners?

The proposal would increase Social Security payroll taxes on earnings over $400,000, but those workers would not receive additional retirement benefits in return for the extra taxes paid.

What is the caregiving credit for Social Security?

The caregiving credit would allow people who step away from work to care for children under the age of six to receive credit towards their Social Security benefits, reducing the financial penalty of taking time off work.