Yet, implementing such a change could be tricky, particularly if that resulted in a bigger reduction for people who claim retirement benefits when they are first eligible at age 62 and who may no longer be able to work. Many argue that could make sense, as people often are waiting longer to retire. (The move from 65 wasn't as drastic because so-called delayed retirement credits for beneficiaries who waited to claim were simultaneously increased to 8% from 3%, Elsasser said.)Ĭongress could consider raising the retirement age again.
#Photograv not coming out well full
Just moving the age to 67 from 66 resulted in a 5% benefit cut that took 40 years to take full effect, said Joe Elsasser, founder and president at Covisum, a Social Security claiming software company. In 1983, Congress mandated that the full retirement age would gradually rise to 67 from 65, a change that is still being phased in today. "The cumulative effect of 176 million people paying a tiny bit more would have a big impact," Shedden said. Even moving it up by just a tenth of a percent or a hundredth of a percent could make a big difference with 176 million workers paying into the system, she said. That rate has not been adjusted in many years, said Martha Shedden, president of the National Association of Registered Social Security Analysts. Because the limit on payroll taxes is adjusted every year, that gap would eventually close.Īlternatively, the 6.2% contribution rate could be increased.
President Joe Biden has proposed reapplying the Social Security payroll tax for wages above $400,000, in effect creating a donut hole between the current cap and the level at which those payroll taxes would again kick in. That limit could be raised so that workers with income well above that threshold continue to pay into the system. However, those payroll taxes only apply to wages up to $142,800 as of 2021. Workers contribute 6.2% of their paychecks into Social Security, which is matched by their employers. Higher taxation on benefit income could be "politically easier for Congress to do," Kotlikoff said. Those taxes could be accelerated by raising the 50% threshold to 85% and the 85% threshold to 100%, Kotlikoff said.Īlternatively, those income thresholds could be lowered, he said. Lawmakers could change those terms in order to bring more money into the system, said Larry Kotlikoff, a professor of economics at Boston University and president of Economic Security Planning, a provider of financial planning tools. Up to 85% of benefits are subject to taxes if an individual has more than $34,000 in combined income, or more than $44,000 for a married couple. Up to 50% of a beneficiary's check may be taxable if their income is between $25,000 and $34,000 and they file their taxes individually, or between $32,000 and $44,000 and they file jointly with their spouse. This includes other income reported on tax returns, such as wages, self-employment, interest and dividends. Currently, Social Security benefits are subject to federal income taxes if your combined income exceeds certain thresholds.