A new government will take office in the White House early next year, pending the outcome of next week’s presidential election, and one of the first challenges it will face will be Social Security. Despite an imminent funding cliff that could result in benefits cuts within the next ten years, Social Security has largely been neglected, even though both major-party nominees—Democratic Vice President Kamala Harris and Republican former President Donald Trump—have run on a variety of platforms to win over the American people. With $1.3 trillion, or 5% of GDP, in 2023, Social Security—which is financed by a combination of taxes and trust funds—is by far the biggest direct expense of the US government’s yearly budget.
Upcoming Social Security changes that beneficiaries should be aware of after the election
Every year, it provides payments to almost 70 million pensioners, disabled individuals, and surviving family members of workers who have passed away. According to experts who spoke to Newsweek, the next government would be wise to address the issue of the Old Age, Survivors, and Disability Insurance (OASDI) program’s trust assets being depleted. According to the most recent annual report from the Office of the Inspector General at the Social Security Administration, benefits might be reduced by 21 percent in 2034 if a solution is not found in the upcoming years. Despite its importance, Social Security has received little attention in the current presidential campaign.
While candidates have proposed tax plans such as canceling payment levies and raising payroll taxes for America’s highest earners, neither has directly addressed how to solve the country’s impending funding cliff, although the future of benefits is a major concern for the vast majority of voters and contributes significantly to later-life incomes. Moreover, the Committee for a Responsible Federal Budget (CRFB), a nonpartisan public policy think tank, stated in September that a retired couple with “medium income” who stop working in 2033 could lose $16,500 from their annual retirement allowance if the SSA’s solvency is not addressed. On average, Americans rely on Social Security benefits for over 40% of their retirement income.
According to Stephen Kates, lead financial analyst for RetireGuide.com, if no action is taken to resolve deficits, the predicted 20% cut in payments will have a substantial impact on many retirees’ ability to continue their lifestyles. The SSA has previously experienced financial difficulties; the early 1980s was another period of severe need for the government organization. Ronald Reagan, who was president at the time, started reforms in 1983, intending to secure the SSA for the ensuing 80 years or so. Originally slated for 2060, over 80 years in the future, the Greenspan Commission on Social Security Reform was created to look into the problems and provide a solution that would prolong the program’s viability for a long time to come.
There are several ways the next president might address the issue, according to Burt Williamson, a retirement specialist at Connecticut-based advisors PlanPrep who spoke to Newsweek. He stated that as soon as they took office, they ought to draft an executive order designating a commissioner to lead a bipartisan panel that would assess the situation and be tasked with suggesting practical answers.
What are the possible solutions for the Social Security system?
Williamson stated that removing the payroll tax cap, which is $176,100 for 2025 and $168,600 this year, gradually and quickly will help alleviate financial concerns. This amount is currently subject to a 6.2 percent income tax, which is paid directly to Social Security by both employers and employees. The remaining 1.45 percent is not capped and is used to pay for Medicare. Moreover, Williamson also highlighted that the proposed reforms would have a substantial impact on the top 6% of wage earners and their employers, producing a large income, although they may be controversial with those affected by the increased payroll tax.
Another way to grow for the future would be to put up to 10% of future inflows into a longevity account. Williamson clarified that this would not be privatization but rather a side portfolio as part of the Social Security trust fund, which could be overseen by a nonpartisan committee appointed to the position. He also said that other government accounts shouldn’t be allowed to borrow from it. The Heritage Foundation, the conservative research organization behind Project 2025, suggested raising the retirement age as a way to generate additional cash. Another possibility, according to the American Academy of Actuaries, is to raise the 6.2 percent tax contributions to 7 percent.
