Social Security’s Old-Age and Survivors Insurance (OASI) Trust Fund will run out of money in 2035, according to most estimates. It will not really run out. Its ability to pay 100% of its obligation will drop, probably to 77%. This will ruin the lives of millions of seniors who count on the payments for a large part, if not all, of their income. If the cost-of-living adjustment (COLA) for Social Security and Supplemental Security Income (SSI) rises faster than expected, the crisis might hit a year earlier.
Among ideas about how full Social Security payments could be extended beyond 2035 is to push out the age at which people can be paid. People who take benefits when they turn 62 would not be able to take them until they reach age 64. Those who take full benefits at 67 could not get them until they turn 69. People who delayed until 70 to get higher benefits could not take them until they are 72. One challenge to that is that the life expectancy of Americans has not changed much in the past decade. Due to the COVID-19 pandemic, the future actually dropped in 2020, 2021, and 2022.
Another option is to suspend COLA completely. Retirees would absorb the effect of inflation. The problems with Social Security would be balanced on the back of their incomes.
Yet another alternative is to increase what people pay into Social Security. Today, this is 6.2% of wages up to a total annual income of $176,100. The top limit could also be higher, perhaps up to $250,000.
Among the easiest ways to save Social Security full payments for a time is to phase out or stop making payments to people with high retirement income. The average monthly Social Security payment is $2,002. People with active and passive retirement income of $5,000 a month would only get $1,000. Those with active and passive income above $10,000 a month would get no payments at all.
People with high retirement incomes may argue that they paid into Social Security, often for decades, and they should get their money back. With Social Security in trouble, that may be tough luck.
Suze Orman Shares the Truth on Social Security After New Tax Law
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