Social Security Crisis Looms: How Will Congress React?
As the retirement of baby boomers continues, the Social Security trust fund is facing an unprecedented crisis. In the most recent Social Security Trustees Report, released in June 2022, it was estimated that the trust funds which have been compensating for the deficit in funding would be exhausted by 2035. According to a Congressional Budget Office report from February 2023, the Old-Age and Survivors Insurance Trust Fund, which provides benefits to retired individuals and the families of deceased workers, could be depleted as soon as 2032.
The Board of Trustees opine that a sweeping benefit cut of up to 23% may be needed by 2034 to sustain payouts for the OASI through 2096. This has sparked a debate amongst lawmakers regarding how to handle the social security crisis. The President’s latest budget proposal calls for increasing the Medicare payroll tax from 3.8% to 5% on those earning more than $400,000 annually, and reducing what Medicare pays for prescription drugs.
In addition, Republicans are refusing to touch Social Security and Medicare, which is allowing Democrats to set the tone for future reforms. There are a few potential ways to alter Social Security, such as increasing the full retirement age to 70 from 67, reducing monthly benefits for all recipients, or adjusting the benefits formula so that higher-income individuals receive reduced payments while lower-income individuals receive the same or increased payments.
For a great number of people, Social Security serves as an indispensable source of financial support during their retirement. For two decades, Gallup has surveyed retired Americans to determine their reliance on the United States' foremost retirement program: Social Security. The results? A staggering 80% of respondents reported that they rely on Social Security income to cover their costs.
It is clear that if Congress fails to act on Social Security reform, the inevitable result will mean higher taxes and reduced benefits. People in the U.S. of all political backgrounds rely on their earned Social Security benefits, and should be sure to plan ahead for potential reductions.
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