Securing Social Security for Future Generations: Solutions, Political Perspectives, and Common Ground

John Robinson |
Categories
Social Security

By John H. Robinson, Financial Planner (May 2025)

Social Security, the bedrock of retirement security for nearly 70 million Americans, faces a projected funding shortfall by 2033, after which only about 83% of scheduled benefits could be paid without legislative action[1][2]. As the population ages and the ratio of workers to retirees declines, policymakers are weighing a range of solutions to ensure the program’s long-term solvency. This article presents an overview of the most prominent proposals, their potential impacts, and where Democrats and Republicans find common ground.

Available Solutions to Strengthen Social Security

1. Increasing the Full Retirement Age (FRA)

  • Description: Gradually raising the age at which retirees can claim full benefits, currently set at 67 for those born in 1960 or later, to 68, 69, or even 70 for future generations of  retirees[3][4].

  • Impact: This change addresses the reality of longer life expectancies and can significantly reduce the program’s funding gap—raising the FRA to 70 could solve up to 68% of the shortfall[1][4].

  • Considerations: Critics note this disproportionately affects those in physically demanding jobs or with lower life expectancies, and could force some to work longer or rely more on personal savings.

2. Eliminating or Raising the Payroll Tax Cap

  • Description: Currently, only wages up to $176,100 (2025) are subject to Social Security payroll taxes. Eliminating or raising this cap would require high earners to pay more into the system[1][5][6].

  • Impact: Subjecting all wages to the payroll tax could close a significant portion of the funding gap—making all wages over $400,000 taxable would reduce the shortfall by 60%[7].

  • Considerations: While this would not impact low- and middle-income earners, opponents argue it represents a significant tax increase on the wealthy and could reduce incentives for high-income work.

3. Increasing Payroll Tax Rates

  • Description: Raising the payroll tax rate from the current 12.4% (split between employers and employees) to 12.6% or higher[1][6][8].

  • Impact: Even a modest increase could generate substantial revenue; a gradual rise to 6.5% per worker (13% total) is supported by 86% of Americans in a recent survey[7][8].

  • Considerations: This approach spreads the burden across all workers and employers, but higher payroll taxes can be politically unpopular.

4. Adjusting Benefits for High Earners

  • Description: Reducing benefits for retirees with higher incomes, while preserving or enhancing benefits for lower-income beneficiaries[1][6][7].

  • Impact: This targeted approach could shift Social Security closer to a needs-based program and is supported by over 90% of Americans for the top 20% of earners[7][8].

  • Considerations: Critics argue it undermines Social Security’s universal appeal.

5. Investing Trust Funds in Equities

  • Description: Allowing the Social Security trust fund to invest in stocks or index funds, rather than only U.S. Treasury bonds[1].

  • Impact: This could potentially increase returns and extend solvency but introduces market risk and political concerns over government investment in private markets.

6. Modifying Cost-of-Living Adjustments (COLA)

  • Description: Using a slower-growing inflation measure (like chained CPI) to calculate annual benefit increases[9][10].

  • Impact: This would gradually reduce the growth of benefits, helping close the funding gap, but could erode retirees’ purchasing power over time.

7. Expanding the Tax Base and Coverage

  • Description: Including currently uncovered workers (such as some state and local government employees) in Social Security and taxing more forms of compensation[6][10].

  • Impact: Broadens the contributor pool and increases revenues.

8. Increasing Legal Immigration

  • Description: Raising annual net immigration would bring more workers into the system, increasing payroll tax contributions[11][6].

  • Impact: A net increase of 400,000 immigrants annually could reduce the 75-year shortfall by about 11%[11]. However, the Social Security Administration and GAO note that immigration alone cannot fully solve the funding gap.

9. Reducing or Eliminating Delayed Retirement Credits

  • Description: Currently, delaying Social Security beyond full retirement age increases benefits by up to 8% per year until age 70[12]. Reducing or eliminating these credits would lower future benefit obligations.

  • Impact: This could save costs but might discourage delayed retirement, which is generally beneficial for both individuals and the system.

Political Perspectives and Common Ground

Democratic Preferences

  • Favor revenue-based solutions: Raising or eliminating the payroll tax cap, increasing payroll tax rates, and expanding coverage[6][13].

  • Oppose benefit cuts: Strongly resist raising the retirement age or reducing benefits, instead supporting benefit expansions and protecting lower-income recipients[13][14].

  • Support progressive benefit formulas and higher taxes on the wealthy.

Republican Preferences

  • Favor cost containment: Raising the retirement age, reducing benefits for high earners, and adjusting COLAs[15][4].

  • Skeptical of tax increases: Generally oppose raising payroll tax rates or eliminating the wage cap, viewing these as tax hikes.

  • Support measures that encourage longer workforce participation and personal responsibility.

Areas of Bipartisan Agreement

Despite political polarization, recent surveys and public consultations reveal surprising consensus among Americans on several key reforms[7][16][8]:

  • Raising the payroll tax cap for high earners

  • Gradually increasing the payroll tax rate

  • Raising the full retirement age (with protections for those in physically demanding jobs)

  • Reducing benefits for the wealthiest retirees

A University of Maryland survey found that over 85% of both Democrats and Republicans support a mix of these measures when presented as part of a comprehensive solution[7][8]. Americans overwhelmingly want Social Security preserved, even if it means paying more[16][14].

Conclusion

Despite the pervasive hyperbole about the impending bankruptcy of Social Security, this article shows that there are a number of viable solutions for shoring up this critical income source for disabled and retired Americans.  It should also be clear that the ideal solution likely will require using some of the above solutions in concert. Policymakers must balance the need for increased revenues with protections for vulnerable populations and the realities of demographic change. While political leaders remain divided on the best path forward, the American public shows strong bipartisan support for a blend of revenue increases and targeted benefit adjustments. With urgent action, Social Security can remain a pillar of economic security for generations to come.

John H. Robinson is the owner/founder of Financial Planning Hawaii and Fee-Only Planning Hawaii. He is also a co-founder of fintech software maker Nest Egg Guru and the new personal finance website NestEggPF.com. 

Further Reading and Sources:

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  1. https://www.bankrate.com/retirement/social-security-funding-solutions/       

  2. https://www.cnbc.com/2024/05/06/social-security-expected-to-run-short-on-funds-in-2035-government-says.html 

  3. https://www.investopedia.com/full-retirement-age-for-social-security-benefits-is-now-67-one-expert-explains-the-change-11686080 

  4. https://www.americanactionforum.org/insight/cbo-analyzes-policy-to-raise-social-securitys-retirement-age/   

  5. https://www.heritage.org/social-security/report/the-impact-removing-social-securitys-tax-cap-wages 

  6. https://www.brookings.edu/articles/fixing-social-security-blueprint-for-a-bipartisan-solution/       

  7. https://publicconsultation.org/swing-six-ss/social-security/     

  8. https://money.com/bipartisan-social-security-funding-ideas/     

  9. https://www.urban.org/exploring-social-security-reform-options 

  10. https://www.pgpf.org/article/solutions-for-social-security-sustainability/ 

  11. https://www.cnn.com/2025/05/01/politics/undocumented-immigrants-social-security 

  12. https://www.aarp.org/social-security/faq/delayed-retirement-credits/ 

  13. https://www.warren.senate.gov/news/press-releases/senate-democrats-propose-amendments-to-protect-social-security 

  14. https://www.kendal.org/news/why-social-security-benefits-wont-be-cut/ 

  15. http://democrats-budget.house.gov/house-republican-budget-plans-cut-social-security-benefits 

  16. https://www.nasi.org/learn/social-security/public-opinions-on-social-security/