The Social Security trustees project that, by the mid-2030s, the system will no longer be able to pay all scheduled benefits. Which reform option should policymakers pursue to help balance the system?
Use our interactive tool to compare how different groups would fare, over time, under the following policy options. (View more detailed results.)
- Current law scheduled pays Social Security benefits as promised, even after the trust fund runs out.
- Current law payable reduces Social Security benefits by a uniform amount after the trust fund runs out so that all benefits in each year can be paid out of revenues from that year.
- Increase the full retirement age (FRA) indefinitely raises Social Security’s FRA (now set at 67 beginning in 2022) and the age for receiving delayed retirement credits by one month every two years, beginning in 2024.
- Increase the early eligibility age (EEA) and FRA raises Social Security’s EEA (now set at 62), FRA, and the age for receiving delayed retirement credits by one month every two years, beginning in 2024.
- Reduce cost-of-living adjustment (COLA) ties beneficiaries’ annual COLA to the change in the chained consumer price index (CPI), which grows more slowly than the standard CPI now used to compute COLAs.
- Change the benefit formula” applies Social Security’s progressive benefit formula to each year of wage-indexed earnings and then sums the top 40 values divided by 35. It also makes the benefit formula more progressive.
- Increase benefits taxation taxes Social Security benefits as normal pension income, beginning in 2020, but also raises the standard deduction that taxpayers ages 63 and older can claim on their federal income tax returns.
- Increase the tax base raises the cap on annual earnings subject to the Social Security payroll tax and that enter the benefits calculation to cover 90 percent of payroll. This increase is phased in over 10 years, beginning in 2016.
Two methods of analysis adjust outcomes for differences in household size. The first method simply divides outcomes by the number of household members, generating per capita measures. The second method uses the equivalence scale developed by the US Census Bureau for calculating supplemental poverty rates, which recognizes savings in household spending from shared living arrangements.