Social Security Reform: Action Needed Before 2033

In 1983, I worked on the Social Security Act in Congress, intended to keep Social Security solvent for 75 years. Instead, it’s projected to last only 52 years, until 2033—just nine years from now. While the law was a bipartisan success, the looming insolvency crisis requires urgent reform.

In order to save Social Security in 1983, the law made some important changes, such as gradually raising the full retirement age from 65 to 67, over the course of more than 22 years, along with other provisions such as an acceleration of Social Security payroll taxes that were adopted in a previous law, a 6 month delay in the cost of living adjustment (COLA), and up to 50% of Social Security benefits could be taxed, depending on income of the beneficiary. 

 Now it’s time again for the President and Congress to adopt new Social Security reforms, and it must be bi-partisan.  There is no way one party will be able to ram their version of reform through the process as historically Social Security has been considered the “third rail” of politics. 

Without action, Social Security benefits may face a 17% cut due to the federal Anti-Deficiency Act, which prohibits the government from spending more than it collects. Here are key reforms Congress and the President should consider now to secure Social Security’s future:

1. Gradually Raise the Full Retirement Age (FRA):
With increasing life expectancy, the FRA should rise to 70, phased in over time, while keeping early retirement at 62.

2. Allow Workers Some Freedom of Choice on Investment of their Social Security Taxes:
Let workers invest a portion of their Social Security taxes in private accounts, potentially yielding higher returns and reducing the burden on the Social Security system.

3. Enhance Private Retirement Savings:
Strengthen incentives for IRAs and 401(k)s to reduce reliance on Social Security.

4. Introduce a New Payroll Tax Cap for High Earners:
Keep the current $160,200 cap indexed for inflation, but continue the payroll tax for incomes above $1 million, indexed for inflation.

5. Means-Test Benefits for the Super Wealthy:
Reduce Social Security benefits by 50% for individuals with a net worth over $50 million or for income exceeding $2 million when drawing benefits.

Further reforms, such as a delayed COLA adjustment, may also be necessary. But inaction is not an option—reform is needed now to protect the 67 million beneficiaries who rely on Social Security.