Current:Home > ContactIs Social Security running out? When funds run dry solution may be hard to swallow. -InvestPioneer
Is Social Security running out? When funds run dry solution may be hard to swallow.
View
Date:2025-04-11 23:38:50
Social Security is in trouble.
To be clear, the program is not in danger of going away. But benefit cuts are a big possibility.
How did we get here?
In a nutshell, Social Security's resources are being drained due to a mass exodus of baby boomers from the labor force. The program's primary revenue source is the income it collects via payroll taxes -- the ones workers pay on the money they earn. But as baby boomers exit the workforce and not enough workers come in to replace them, that revenue source is likely to continue to shrink.
Now Social Security has trust funds it can fall back on to keep up with scheduled benefits -- that is, until those trust funds run dry. The program's Trustees expect that to happen in 2034, though that timeline could change for better or worse in the coming years.
The good news is that lawmakers have floated several proposals designed to pump more revenue into Social Security and prevent benefit cuts. The bad news is that one of their most feasible ideas could leave you paying into the program even more.
Are Social Security taxes going to increase?
Social Security taxes amount to 12.4% of wages up to a certain point that changes every year. This year, workers pay Social Security tax on up to $160,200 of income. Those who have employers split that 12.4% tax evenly with the companies they work for, while people who are self-employed have to fork over that entire 12.4% themselves.
Raising the wage cap for Social Security tax purposes could do the job of shoring up the program's finances and avoiding benefit cuts. But going this route may not be as effective as some might think, since it's a relatively small portion of the population that earns more than $160,200.
A more far-reaching solution could be to raise the amount of Social Security tax all workers pay from 12.4% to a higher percentage. That change would impact not just higher earners, but workers across the board. And as such, it's the solution lawmakers may be most inclined to move forward with.
Of course, increasing Social Security taxes would no doubt put a burden on workers across a range of income levels. And it's a solution many people might end up sorely unhappy with.
But it's a solution that might be the best one nonetheless. And so it's a good idea to gear up for the fact that Social Security taxes could grow even more burdensome in the coming years as lawmakers attempt to prevent benefit cuts.
Splitsville:After a divorce, are you eligible for your ex-spouse's Social Security benefits?
Will you benefits change in 2024?The latest forecast for Social Security COLA.
Clearly, that's not ideal. But you can help soften the blow by seeking out other ways to lower your tax burden as a whole. That could mean pumping more money into an IRA or 401(k) plan, or even being more savvy with tax deductions that relate to things like homeownership and self-employment.
It's clear that something needs to be done to address Social Security's impending financial shortfall. Universally raising taxes could end up being the best thing lawmakers are able to come up with, and that's a reality everyone needs to face.
The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
Offer from the Motley Fool:The $21,756 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $21,756 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.
veryGood! (16)
Related
- Behind on your annual reading goal? Books under 200 pages to read before 2024 ends
- Environmental activist sticks protest poster to famous Monet painting in Paris
- A new American Dream? With home prices out of reach, 'build-to-rent' communities take off
- WNBA upgrades hard hit on Caitlin Clark, fines Angel Reese for media violation
- Sam Taylor
- It’s been 25 years since Napster launched and changed the music industry forever
- Things to know about the fatal shooting of a Minneapolis officer that police describe as an ‘ambush’
- Deontay Wilder's mom says it's time to celebrate boxer's career as it likely comes to end
- See you latte: Starbucks plans to cut 30% of its menu
- Inside the Eternally Wild Story of the Ashley Madison Hacking Scandal
Ranking
- Military service academies see drop in reported sexual assaults after alarming surge
- Shocking revelations from 'Life & Murder of Nicole Brown Simpson' Lifetime documentary
- Some hurricanes suddenly explode in intensity, shocking nearly everyone (even forecasters)
- Unprecedented ocean temperatures make this hurricane season especially dangerous
- Rolling Loud 2024: Lineup, how to stream the world's largest hip hop music festival
- More women made the list of top paid CEOs in 2023, but their numbers are still small compared to men
- BIT TREASURE: Exploring the Potential Impact of Bitcoin Spot ETFs on Cryptocurrency Prices
- Hour by hour: A brief timeline of the Allies’ June 6, 1944, D-Day invasion of occupied France
Recommendation
A Mississippi company is sentenced for mislabeling cheap seafood as premium local fish
California saw 5 earthquakes within hours, the day after Lake County, Ohio, was shaken
'I'm prepared to (expletive) somebody up': Tommy Pham addresses dust-up with Brewers
Northern lights in US were dim compared to 'last time mother nature showed off': What to know
This was the average Social Security benefit in 2004, and here's what it is now
Orson Merrick: Some American investment concepts that you should understand
South Korea says North Korea is sending even more balloons carrying garbage across border
NFL diversity, equity, inclusion efforts are noble. But league now target of DEI backlash.