I wrote two days ago about a report that recommended eliminating the option to collect Social Security at age 62. The author, who is affiliated with the conservative think tank American Enterprise Institute also advocated leaving Social Security Disability as is and eliminating Social Security taxes for workers who have worked more than 35 years.

I got a couple of responses from readers who thought this retirement planning proposal was lousy, including a loud raspberry from my Bankrate colleague Barbara Whelehan, who shares this retirement blog with me. Barbara said:

“You make a good case, but I have to say that I agree with Mary (another reader who commented) — lift the cap on Social Security taxes so that high earners don’t get a break. Why should low- and middle-income earners pay on all their earnings, but high earners only pay taxes on up to $106,800 of their earnings? Lifting the cap would help make Social Security solvent for another 75 years, an argument I made in a recent blog here on Bankrate. …”

The American Academy of Actuaries calculates that gradually raising the annual earnings cap from $106,800 to cover 90 percent of all wages (current cap covers about 83 percent of all wages) and using the higher cap for calculating benefits, too, would solve 37 percent of the Social Security shortfall — but obviously not all of it.

To solve all of it, you would have to eliminate the cap and ask high earners to pay Social Security tax on all their earnings but only calculate benefits on earnings up to the current cap.

Barbara says, “I vote for raising the income ceiling, but not the payouts.”

With all due respect, Barbara, I think that’s totally unfair. To increase Social Security taxes without increasing the amount people who pay those taxes get in benefits would be an enormous tax increase on people who really aren’t all that wealthy. Earning $106,800 is a good income, but it doesn’t make you Bill Gates, especially in high-cost parts of the country.

The actuaries outline various alternative scenarios, but none of them are perfect and all of the ones that eliminate the entire shortfall involve either cutting benefits or raising taxes. Nothing surprising there, but no matter how you cut it, it’s painful for somebody, and I think the pain level on your proposal is unacceptably high.

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