The Social Security Act of 1935 was one of several New Deal programs signed into law by President Franklin D. Roosevelt. It was created to be an anti-poverty program for some of the most vulnerable Americans, including those who were unemployed, disabled, or retired. For these beneficiaries, Social Security meant economic security, which was strongly linked to better health outcomes.
And that’s still the case in 2024. If Social Security didn’t exist, two-thirds of older adults would be considered in poverty. Today, roughly 40 percent of older Americans rely on Social Security benefits as their sole source of retirement income. Maybe they never had an employer-sponsored 401(k) plan, or they just couldn’t save enough due to other life priorities. For them, being on a fixed budget makes decisions about how to pay for health care, food, housing, and other necessities a constant challenge.
At the Health Foundation, we believe that Social Security is an essential program, one that Americans rely on to ensure their health, security, and dignity in the final years of life. Yet despite the program’s popularity and importance, the Social Security trust fund is expected to run out of money by the end of 2033. Elected officials and policymakers on all sides of the political spectrum have proposed different ideas on how to ensure the program’s solvency.
How Some Political Leaders Hope to Strengthen Social Security
Three of the most common proposals are:
- Raising the full retirement age from 67 to 69 or 70, which is favored by many conservatives
- Raising or eliminating the payroll tax cap, which is favored by many progressives
- Privatizing Social Security, which is favored by many conservatives
Here are some implications of these approaches:
Should we raise the retirement age?
The full retirement age is currently 67, though individuals can begin claiming reduced benefits at age 62. Those who favor raising the full retirement age to 69 or 70 assume Americans are living longer. But “average life expectancy” is a misleading data point. That’s because the average is not the same for all socioeconomic, racial, and ethnic groups, a consequence of health disparities driven by inequities. As one example, indigenous people have an average life expectancy that’s significantly lower than any other racial or ethnic group in the United States.
It’s also unrealistic to expect everyone to postpone retirement and work longer. Consider the different types of work (e.g., an office job vs. manual labor) and unforeseen medical conditions. It’s unreasonable to assume that each person would be able to work for several more years. Finally, raising the retirement age would reduce benefits across the board, which would have an adverse effect on those earning the least to begin with. According to the Nationwide Retirement Institute, a significant percentage of Americans start collecting Social Security benefits early, while continuing to work—not because they want to, but because they have to. If the full retirement age were changed to 70, these individuals would have their benefits reduced by almost half.
What’s the significance of the payroll tax?
From the moment we earn our first paycheck, we begin paying into the federal retirement system. That’s because Social Security is designed to be a pay-as-we-go system financed mostly by payroll taxes from workers and employers. Currently, the payroll tax is capped at an annual salary of $168,600, and individuals with incomes higher than this amount—roughly 6 percent of the total working population—earn more than the taxable maximum. Raising the payroll tax cap to $400,000 or eliminating it altogether would create more revenue to fortify the trust fund.
How would privatizing Social Security work?
The government-run accounts would be replaced by a privatized savings system based on self-directed retirement accounts. People could invest part of their payroll contributions in a separate account, whose value would fluctuate depending on their investment funds. Those who favor privatization insist it would increase the savings rate, yield better investment returns, produce higher retirement benefits, and boost the economy. Critics argue it would expose individuals to greater investment risks, putting middle-and lower-income Americans at a major disadvantage compared to their wealthy peers. Additionally, Social Security is a public good that provides a critical and reliable safety net—by privatizing it, people would be putting their trust in an investment-based system.
Other lawmakers have proposed doing nothing about Social Security so as not to stir up the political waters. But taking no action would be akin to the proverbial kicking the can down the road.
A Sacred Trust for All Americans
Social Security has been helping Americans for nearly 90 years. There’s no reason it can’t continue to support retirees and families for decades to come. Any short-term or long-term modification to the program should be done with full transparency. And proposed changes must not increase income inequality, as this would also have an adverse impact on our nation’s health equity. We contribute to the Social Security trust fund our entire working lives—and each of us deserves the maximum allowable benefit when we finally retire.
As the 2024 election approaches, key government programs will come under scrutiny, and any potential reforms will have lasting consequences. Voters should know where their elected leaders stand on the issue of Social Security. And the next presidential administration must work with Congress to preserve and strengthen the Social Security program in a manner that’s equitable for everyone. At the Health Foundation, we believe that Social Security can continue to serve as a retirement safety net, and we support raising the payroll tax to help keep the program solvent.
