This article originally appeared on The Motley Fool.
Social Security income is vital to the well-being of our nation's retirees—data from the Social Security Administration shows that 61 percent of retirees currently receiving Social Security rely on their benefits for at least half of their monthly income. But seniors' benefits could be in trouble less than a generation from now.
According to the Social Security Trustees Report from 2016, the program is on track to deplete its more than $2.8 trillion in spare cash by the year 2034. If this cash is exhausted and Congress passes no new laws to boost revenue collection, benefit cuts of up to 21 percent could be needed across the board to sustain benefit payouts through 2090. This isn't a comforting outlook for those seniors counting on Social Security income to make ends meet.
The unanswered question at this time is how best to fix Social Security. Lawmakers have no less than 15 solutions on the table, but political gridlock in Congress has halted any progress. However, the American public has a pretty clear picture of what it'd like to see happen.
Based on responses from nearly 8,700 registered voters across eight states, the Voice of the People Citizens Cabinet Survey conducted by the Program for Public Consultation, School of Public Policy, University of Maryland, found that Americans from both the Democratic and Republican parties agree on a four-step solution to fix Social Security.
1. Reduce benefits for the top 25% of earners
The first solution that had overwhelming support from Democrats and Republicans was to reduce Social Security benefits for top income earners. Specifically, the survey found that 76 percent of all survey-takers supported reducing benefits for the top 25 percent of earners. Comparatively, fewer than four in 10 supported reducing benefits for the top 40 percent, and less than one in five respondents was in favor of reducing benefits if you were among the top 50 percent of earners.
Essentially what the respondents are suggesting is a type of means-testing. The presumption is made that higher-income individuals who made a lot of money throughout their lifetimes probably aren't going to be reliant on Social Security income when they retire. Rather than take that money away from top income earners, the respondents agree with the idea of reducing what the top 25 percent of earners take home in pay each month. By reducing the take-home benefits of the top 25 percent, the budgetary shortfall would drop by an estimated 7%.
2. Raise the retirement age gradually to age 68
Secondly, there was substantial support for raising the retirement age at least one year to age 68. The amendment to Social Security passed by Congress more than three decades ago will see the retirement age increase to 67 years for those born in 1960 in the coming years, but no additional retirement age increases are currently in the works on Capitol Hill. A whopping 79 percent of respondents, including 78 percent of Democrats (who usually oppose raising the retirement age) favored the idea.
Why raise the full retirement age? People are living longer than ever these days, which means boosting the full retirement age—the point at which you become entitled to 100 percent of your Social Security benefits—could encourage seniors to wait to file for benefits, or better yet, to work even longer. Working longer could add more payroll tax revenue to the program. It would also be a way to factor in increasing life expectancies.
According to the survey, increasing the retirement age one year to at least 68 would reduce the budgetary shortfall by 15 percent.
3. Increase the payroll tax cap to $215,000
Thirdly, the American public overwhelmingly wants to see the payroll tax earnings cap increase to at least $215,000. Within the survey, 88 percent of respondents were in favor of the idea, including 84 percent who identified as Republican (a party that has avoided the idea of raising the payroll tax cap).
The argument in favor of raising the payroll tax cap is pretty easy to understand. Based on the upcoming changes to the Social Security payroll tax that were announced three weeks ago, combined earnings between $1 and $127,200 are to be taxed at 12.4 percent in 2017, with you and your employer usually spitting this tax responsibility down the middle (6.2 percent each). Any earnings above and beyond $127,200 are considered free and clear of Social Security taxation. Since most Americans have combined earnings that are below $127,200, raising the payroll tax cap would affect only a small percentage of the population (about 10 percent) and require wealthier Americans to pay more into the system.
According to the Voice of the People survey, raising the payroll tax cap to $215,000 would eliminate about 27 percent of the current shortfall.
4. Increase the payroll tax rate to 6.6%
Lastly, 76 percent of respondents, including 72 percent of those identifying as Republican, favored the idea of increasing the payroll tax from 6.2 percent, which assumes you're employed and splitting the responsibility of the payroll tax with your employer, to 6.6 percent. For the self-employed, the responsibility would increase from 12.4 percent to 13.2 percent. A similar idea that suggested increasing the payroll tax to 6.9 percent got less than 50 percent support.
The reason that a payroll tax hike is needed is simple: the program needs more money to maintain benefits for those 61 percent of seniors reliant on the program to supply at least half of their monthly income. Raising the payroll tax would help eliminate an estimated 17 percent of the shortfall.
Altogether, these four measures would eliminate about 66 percent of the estimated budgetary shortfall.
Two additional observations
The Voice of the People survey also offered two additional observations that are worth mentioning:
First, the entirely of the budgetary shortfall could be eliminated if the payroll tax cap were eliminated in its entirety. In other words, if all combined earnings were taxable, then the budgetary shortfall would be reduced by 66% percent from this action alone. A previous study from the Centers for Retirement Research at Boston College pegged the budgetary benefit of eliminating the cap at only 30 percent. Which source is closer is really anyone's guess at this point. However, a slim majority of survey-takers, 59 percent, including 54 percent of self-identified Republicans, favored eliminating the payroll tax cap in its entirety.
The other intriguing observation that can be made is that there wasn't bipartisan support for increasing the benefits of certain low-wage workers, or in providing supplemental benefits for those over the age of 85. Though the ideas narrowly failed among Republican respondents, this pretty clearly suggests that lawmakers would probably have better luck appeasing the public by working on a top-down fix of Social Security rather than a bottom-up approach.
The $15,834 Social Security bonus you could be missing
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $15,834 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Simply click here to discover how to learn more about these strategies.