The Social Security shortfall has been a major concern for years, with multiple solutions proposed to tackle the issue. However, Congress has yet to take significant action, as political divisions continue to block progress. The problem is becoming increasingly urgent, with the program running a deficit since 2021. If no action is taken, Social Security’s trust funds could run out by 2035, potentially reducing benefits by at least 17% within the next decade.
Although Social Security won’t stop paying benefits if this happens, a reduction would significantly impact millions of Americans relying on these payments. Fortunately, there is still time to address the problem. A recent survey by the University of Maryland’s Program for Public Consultation suggests that some bipartisan solutions are widely supported by voters and could help ease the shortfall.
Proposed Solutions to Address the Social Security Funding Gap
Here are three main proposals that could solve parts of Social Security’s financial problems:
1. Make Income Over $400,000 Subject to Social Security’s Payroll Tax
Currently, Social Security relies on payroll taxes split evenly between employees and employers. These taxes apply to wages up to a certain cap—$168,600 in 2024 (rising to $172,000 in 2025). Earnings above this cap are not subject to payroll taxes, which has led to unfairness in contribution distribution.
One proposal suggests extending Social Security’s payroll tax to wages over $400,000. According to the University of Maryland’s survey, this idea could address up to 60% of Social Security’s funding shortfall. The proposal enjoys bipartisan backing, with 89% of Democrats and 87% of Republicans supporting it.
Although not yet implemented, this proposal could represent a strong first step toward solving the issue.
2. Raise the Payroll Tax Rate to 6.5% Over Six Years
The current Social Security payroll tax rate is 6.2% for both employees and employers, leading to a combined tax rate of 12.4%. One idea proposes a slow increase to 6.5% over six years, which would help close 15% of Social Security’s funding gap.
The change would have a minimal financial impact on individuals but could bring significant collective benefits. This proposal has 87% support across both major political parties, according to the University of Maryland’s research.
3. Gradually Raise the Full Retirement Age to 68 by 2033
Social Security allows workers to claim retirement benefits as early as age 62. However, they must wait until their full retirement age (FRA) to receive their full benefits. For those born in 1960 or later, the current FRA is 67.
A proposal suggests gradually raising the full retirement age to 68 by 2033, which would help close 15% of the funding shortfall. This change has widespread support, with 88% of Democrats and 91% of Republicans in favor, according to the University of Maryland’s survey.
4. Reduce Benefits for High-Income Earners
Social Security’s benefit formula uses income to determine payouts. Currently, the formula allocates different percentages of income depending on income levels. A proposal suggests reducing the benefits for workers in the top 20% of earners by changing the formula to allocate only 5% instead of 15%.
This adjustment could address 11% of the shortfall and has broad bipartisan support, with 93% of Democrats and 92% of Republicans backing the idea, according to the survey.
The Path Ahead: Can Consensus Be Reached?
While these proposals have strong public support, the real challenge lies in Congress’s inability to act due to political gridlock. The University of Maryland’s survey highlights that voters are eager to see practical, bipartisan measures implemented.
With Social Security running on deficits and trust funds expected to run out by 2035, the clock is ticking. Implementing even one or a combination of these strategies could provide a lifeline for the program, ensuring that millions of Americans continue to receive their benefits without drastic cuts.
The coming years will test Congress’s ability to listen to voters and take decisive action. Until then, the future of Social Security remains uncertain.