Implementing changes to avoid cuts in the benefits offered by Social Security is almost restricted.
Retirees enjoying retirement (Photo: Investopedia)
Avoiding Cuts in Social Security Still Possible?
The latest annual report coming from the Board of Trustees that by 2033, Social Security finances would have a 23% cut in its benefits. In light of this prediction, lawmakers proposed to raise the retirement age to 69, which would allow people at this age to enjoy the said benefits and retirement overall. However, the proposal is very unlikely to be passed as a law but the proposed fix made lawmakers circle back on a reoccurring problem for decades regarding retirement. If changes are not made by then, benefits will surely get cut.
Raising the retirement age would make people work longer, which could possibly increase the tax revenue, leading to the availability of benefits. Bloomberg reached out to retirement experts across the political world, hoping to find other solutions. Solutions were indeed found, from focusing the program on allocating low-income workers to diverting the standard revenue to alleviate the predicted shortfall of the benefits to be received.
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Possible Solutions To Avoid Cuts In Social Security Benefits
The pay-as-you-go system of Social Security goes back to the 1930s, a time when lawmakers agreed to pay out benefits that were higher compared to the contributions for the early age of Social Security and its recipients. All this is compared to building up a trust fund that would grow and would be used to pay interest.
Coming up with solutions to eradicate the shortfall is not that difficult since there are various options to increase revenues or reduce benefits. Of course, cutting benefits is not an option since people do not save that much during their time in employment. With that in mind, changing the revenues would be the way to go. Raising the tax rates of payrolls or expanding its tax base overall.
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