The future of Social Security remains a looming question for millions of Americans who count on those benefits in retirement. If President Joe Biden wins a second term, his administration will face mounting pressure to make changes for the future of the Social Security program. Substantial reforms may be necessary to ensure the program remains available for generations to come.
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Current projections suggest that Social Security will run dry by 2034, which means that hard choices may be needed to shore up the program’s finances. The decisions made during a potential Biden second term could dramatically reshape Social Security for both current and future retirees.
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A ‘Means Test’ for Benefits
Aaron Cirksena, founder and CEO of MDRN Capital, suggested that one potential change that Biden could implement would be “a potential way to means test Social Security benefits for higher net worth people.”
This would mean reduced monthly checks for higher net-worth retirees, while preserving more generous benefits for lower and middle-income seniors. It would mark a big change from Social Security’s current policy of providing the same benefits (in terms of percentages) to all retirees, regardless of their wealth.
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Addressing the Long-Term Crisis
Of course, Biden may have to take even bolder action to address Social Security’s looming problem of dwindling funds.
The Social Security Administration’s latest projections indicate that the program’s funds will be depleted by 2034, at which point incoming payroll taxes will only be sufficient to cover approximately 77% of scheduled benefits. There simply won’t be enough to go around.
“It should be clear, however, that Social Security will not run out in 2034,” said Cirksena. “It simply won’t have enough new money coming in to meet the obligations. There will always be new money flowing into Social Security.”
Changes to Retirement Age
The first approach Cirksena said Biden might try to implement would be raising the age at which full retirement benefits are available from Social Security.
“Raising retirement age for younger workers is the obvious solution,” said Cirksena.
While politically contentious, this could help the program’s resources last longer, as well as account for increasing life expectancies.
Stricter Criteria for Disability Benefits
The Biden administration may also look to tighten the eligibility criteria for Social Security Disability Insurance (SSDI), said Cirksena.
SSDI provides benefits to individuals who have worked and paid Social Security taxes but can no longer work due to a long-term disability. If the criteria for who qualifies becomes stricter, less people would be able to claim benefits, which would mean the funds in the program would last longer.
However, care would need to be taken so that the process does not become too difficult for legitimately disabled individuals to receive the support they need.
A Social Security Tax on Higher-Income Earners
One of the more dramatic potential revenue-raising options Biden could pursue, according to Cirksena, is removing the income cap for Social Security payroll taxes entirely, creating a new tax for higher income earners.
“It wouldn’t be a surprise if the Biden Administration looks at a more permanent solution that combines a social security tax on higher income earners well above the current limitations with delaying retirement for more workers,” said Cirksena.
As of 2024, earnings above $168,600 are exempt from Social Security’s 6.2% payroll tax. If all wages were taxed at the same rate, it could provide a major influx of funds to Social Security.
This would mean a significant tax increase for higher-income workers, which is unlikely to be popular. But with a looming shortage of available revenue, removing the cap is one way to make Social Security’s funding last for everyone beyond 2034. This may not fix all of Social Security’s issues, but it could be one piece of a reform package which Biden could implement.
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This article originally appeared on GOBankingRates.com: I’m an Economist: Here’s My Prediction for Social Security If Biden Wins the 2024 Election
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