How Taxes fit into Social Security’s Financial Future - Yahoo!
Unless you were sleeping (or perhaps out of the country) since the last Presidential election, you’ve likely heard a lot about President Trump’s desire to change how income taxes are levied on Social Security benefits. Repealing taxes on Social Security benefits, as well as not taxing tip or overtime income are obviously popular changes welcomed by all those affected, including about half of all Social Security beneficiaries and those who work in our services industries. After all, what’s not to like about more money in our pockets?
However, it’s also important to understand the effect of these popular changes, because – if they are enacted- there would also be an effect to Social Security’s bottom line. And the bottom line is that the taxation of Social Security benefits is an important source of revenue for Social Security, and eliminating it would likely advance the date at which full SS benefits can no longer be paid. According to the Trustees of Social Security, that date is about 2034 when the reserves in the SS Trust Fund are projected to be depleted, necessitating an across the board cut in everyone’s SS benefit. All of this is discussed in this Yahoo! News article by Sean Williams of the Motley Fool. Click here to read the Yahoo! article.
The solution, of course, is a common sense reform of the entire Social Security program – one which can accommodate such revenue reductions while still improving the program’s financial status. As an example of the leading thoughts on reforming Social Security, the Association of Mature American Citizens (AMAC, Inc.) believes Social Security must be preserved and modernized to meet the demands of 21st-century economics. AMAC’s position is that this can be achieved without payroll tax increases via relatively slight program modifications, including cost-of-living adjustment (COLA) process changes and modifications to the formulas for calculation of payments to higher-income beneficiaries. Changes to the age for maximizing benefits are included in AMAC’s position, along with (1) an increase in the thresholds where benefits are subject to income tax; (2) indexing of these thresholds annually to account for inflation; (3) improved survivor benefits, (4) eliminating the reduction in benefits for those choosing to work before full retirement age; and (5) improved savings tools for future retirees, including a savings account that builds estate value. AMAC is resolute in its mission that Social Security be preserved for current and successive generations and has gotten the attention of lawmakers in D.C., meeting with many congressional offices and staff over the past decade.