Money is getting tight, but small tweaks by Congress would preserve solvency
Social Security is a pay as you go system, which is funded by payroll taxes. That’s the Federal Insurance Contributions Act or “FICA” line item you see on your pay stub.
Munnell recently noted that in addition to longer life expectancies, “the combined effects of the retirement of baby boomers and a slow-growing labor force due to the decline in fertility reduce the ratio of workers to retirees from about 3:1 to 2:1 and raise costs commensurately.”According to The 2022 Trustees Report, the Old-Age and Survivors Insurance Trust Fund, which pays retirement and survivors benefits, will be able to pay scheduled benefits on a timely basis until 2034.
The possible fixes could include some combination of: raising the level on which FICA taxes are levied ; increasing the current FICA tax rate, which is set by statute at 6.2% for employees and employers, each or 12.4% for self-employed Americans; or raising the retirement age at which you can claim Social Security retirement benefits. In other words, a little tinkering here and there should help solve the problem.
— You can claim as early as age 62, but it will be permanently reduced by as much as 25%, which also could affect a non-working spouse.— If you are still working and under full retirement age for the entire year, the government deducts $1 from your benefit payments for every $2 you earn above the annual limit .
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