There may be a longevity argument for tweaking the FRA once again. Another powerful lever that can be pulled is to address how income inequality is impacting tax collections. The way the payroll tax is collected, high-income earners get a big break: Every penny earned over an annual limit ($137,700 in 2020) is not subject to the Social Security tax. Everyone who earns below the threshold has 100% of their paycheck taxed.
Recalibrating that upper limit to capture more tax from high wage earners would go a long way toward solving the cash flow problem.
Right now there are two clear steps households concerned about Social Security might consider.
First, if you're in the camp that wants Social Security fixed, let your representative and senators know. Sooner than later. Call, email, write. Need a prompt? Consider referencing what Jo Ann Jenkins, CEO of AARP wrote to President Trump in August, when he floated the notion of eliminating the payroll tax:
"Social Security is arguably the most important and successful program in our nation's history. It is the largest source of retirement income for most Americans and provides nearly all income (90% or more) for one in four seniors. The American public overwhelmingly supports Social Security, and that support remains high across party lines and age groups."
A wonky analysis from the head of retirement research at Morningstar analyzed whether the delay strategy would still make sense if benefits are cut either 10% or 25%. The short answer: Yes. In the current rate environment, delaying still pays.
And keep in mind that just because you claim now doesn't mean you wouldn't potentially see your benefits reduced. Which raises this consideration: Do you want a smaller benefit reduced or a bigger benefit reduced?
"While each retiree situation is unique, despite the uncertainty surrounding cuts to Social Security retirement benefits, I still think trying to delay claiming Social Security benefits as long as possible is the best strategy if you can," wrote Morningstar's David Blanchett.
Find help stretching your resources to wait to claim as long as possible here: https://www.rate.com/research/news/more-retirement-social-security-strategy
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