There have been many suggestions for repairing the Social Security shortfall. A report offered today by the National Academy of Social Insurance presented some new-to-me ideas:
- Raise FICA rate by one-twentieth of 1 percent per year over 20 years, up to 7.2 percent in 2035 — 63 percent fix.
- Dedicate to Social Security a revamped estate tax to apply a 45 percent rate to the portion of estates in excess of $3.5 million for individuals, or $7 million for couples — 23 percent fix.
- Dedicate to Social Security a 0.25 percent financial speculation tax on the purchase and sale of publicly traded stock, credit swap derivatives, and other financial instruments — 93 percent fix.
- Dedicate to Social Security a 5 percent surtax on adjusted gross income in excess of $1 million — 45 percent fix.
- Cover all contributions to salary reduction plans — 10 percent fix.
The report also points out that the value of Social Security for people born after 1960 will be cut by 19 percent thanks to the changes enacted in 1983, a serious retirement planning challenge for younger savers. These are the changes that add up to that 19 percent:
- Raising the full retirement age to 67
- Tax on 50 percent of Social Security for couples earning $32,000 or more and individuals making $25,000 or more. (Most people will pay thanks to inflation.)
- A six-month delay of the onset of cost-of-living adjustments.
The National Academy of Social Insurance would not only reverse these cutbacks, but it would also like to see three additions to Social Security to strengthen it:
- Update the special minimum benefit to ensure that low-income workers can retire at age 62 after 30 years of work without facing the prospect of impoverishment.
- Restore benefits for children of disabled or deceased workers until age 22 while they are in college or vocational school.
- Improve benefits for the oldest to compensate for inflation.
It feels odd to talk about improvements to Social Security in the midst of the furor over the national debt, but in the long run, keeping large segments of the population solvent and spending money is a huge plus for the economy.