Right now, Social Security is failing seniors in important ways — and the situation is only likely to get worse.
Unfortunately, fixing the problem is likely going to be a major challenge, but it is something that needs to be done sooner rather than later to protect the vulnerable retirees who rely on their benefits.
There are two major changes that need to happen to Social Security to ensure that it can fulfill its role in helping to keep seniors out of poverty and provide them with the security they deserve in their later years. Here’s what those two changes are.
1. Social Security’s trust fund needs to be shored up
The first and most critical change that needs to happen to Social Security is that the program’s financial standing needs to be improved. Right now, the trust fund is expected to run dry as soon as 2035, and if this happens, it would necessitate an automatic 17% cut to benefits. Since many retirees are already struggling to cover their essential costs with their current benefits, such a big cut would be absolutely devastating.
There are many potential solutions to improve the stability of Social Security. One option on the table would require higher earners to pay more in Social Security tax without a corresponding increase in benefits. Right now, Social Security taxes are only collected on income up to the wage base limit, which is $176,100 in 2025 and which will go up to $184,500 in 2026. If people who earned above that amount paid Social Security taxes on some of their extra income without that income counting when benefits are calculated, this would provide more money to fund everyone’s benefits.
Other proposals include changing the full retirement age so people need to wait longer to claim their full benefits, raising Social Security taxes on everyone, or cutting benefits for some higher-earning recipients.
When and if lawmakers finally do take action to get Social Security onto firmer financial footing, it is likely that some combination of these options will be chosen. When reforms were made in the 1980s, for example, new taxes were added on benefits, and the full retirement age was also moved later. While a new plan to fix Social Security will require similar compromise and hard choices, lawmakers have to act because they are running out of time to do so before the deadline comes when Social Security’s trust fund runs dry, causing benefit cuts to happen automatically across the board.
2. The COLA formula needs to change
Another change is also necessary to fix a serious problem with Social Security. Benefits are losing value over time, leaving America’s oldest and most vulnerable retirees struggling to get by.
See, there are Cost of Living Adjustments built into Social Security in order to make sure inflation doesn’t erode the buying power of benefits. COLAs happen in most years because otherwise, benefits would be worth less each year as prices rise. Unfortunately, while these COLAs have helped, they have also not done a great job of providing protection from rising prices.
COLAs use a formula called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This formula measures cost increases on goods and services used by urban wage earners and clerical workers, which is not a group that tends to devote a very significant portion of their income to things like healthcare costs. Since areas like healthcare, where seniors tend to spend the most money, see higher-than-average inflation, and this isn’t accurately reflected in the COLA formula, retirees end up losing ground.
An assessment from the Senior Citizens League revealed Social Security benefits are only worth around $0.80 on the dollar compared with their buying power in 2010. This is a huge decline that will only keep getting worse, and that will make vulnerable seniors poorer unless a formula change is made. CPI-E, or the Consumer Price Index for the Elderly, would be more accurate in calculating COLAs, but the index is experimental right now, and efforts to change the COLA formula to CPI-E may not be well-received since it would mean larger raises when money for benefits is running out.
Ultimately, these two changes should go hand in hand. The trust fund’s financial problems should be fixed to make sure Social Security is there for seniors, and the COLA formula should be altered to ensure those seniors get bigger raises that actually stop them from losing ground. These two changes would go a long way towards making Social Security actually work well for the retirees who depend on it.
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