Social Security Will Do This for the First Time in 39 Years in 2020.
For many retired Americans, Social Security is a critical source of income.
The 1983 amendments included an acceleration of payroll tax increases, which generated more money for the program, the introduction of taxation on Social Security benefits if individuals and couples filing jointly earn more than $25,000 and $32,000, respectively, and a gradual increase in the full retirement age.
But according to the 2016 Social Security Trustees annual report, the program will begin paying out more in benefits than it's generating in revenue by 2020.
Over the past four years, the net increase in asset reserves at the end of the year has shrunk to a range of $23 billion to $35 billion following more than a decade of more than at least $107 billion net increases in the annual reserve.
The issue is that Republicans and Democrats both have workable solutions, so neither party is willing to back down.
By 2022, the full retirement age will have risen to 67 years, albeit it will have moved higher by just two years over the previous four decades.
Republicans would like to see a gradual increase in the full retirement age to 68, 69, or 70, which would coerce seniors to either wait longer to receive their full benefit or to retire earlier and accept a steeper permanent deduction in benefits (benefits increase by an average of 8% per year, beginning at age 62 and ending at age 70).
Right now, earned income between $0.01 and $127,200 is taxed at the aforementioned 12.4% rate, while earned income above and beyond this point isn't subject to Social Security's payroll tax.
Since eliminating the cap entirely would only impact about 10% of all workers, and a majority of workers are already paying tax on every cent they earn, it's among the most popular solutions with the public.