AARP's Urgent Message to Congress on Social Security - And What Retirees Should Know

The countdown to Social Security's funding deadline is getting shorter, and AARP wants Congress to act before retirees are caught in the middle. With the retirement trust fund projected to run short in late 2032, the organization says Americans "deserve to count on" the benefits they have earned and continues to oppose any proposal that would reduce monthly checks.

Understanding what AARP is pushing for, and why, can help you make sense of the debate and what it could mean for your retirement plan.

What AARP is actually asking Congress to do

AARP says Congress should strengthen Social Security without reducing the benefits retirees have earned. CEO Dr. Myechia Minter-Jordan put it simply: "No family should see any cuts to what they've earned in Social Security." The organization also opposes privatizing the program and believes any changes should be debated openly in Congress.

Instead of cutting benefits, AARP has urged lawmakers to bring more money into the program. One proposal it supports is raising the payroll tax cap so higher earners pay Social Security taxes on more of their income.

It has also called for improving customer service at the Social Security Administration (SSA) by reducing wait times and making it easier for beneficiaries to get help.

AARP believes acting sooner would leave Congress with more choices. As Bill Sweeney said, "the longer lawmakers wait, the harder the fixes get." Making gradual changes now would give workers and retirees more time to adjust than waiting until the program is much closer to its funding deadline.

How raising taxes on higher earners would close most of the gap

One of the leading proposals would ask higher earners to pay Social Security taxes on more of their income. Today, the 12.4% payroll tax applies only to the first $184,500 a worker earns. Income above that is not subject to Social Security payroll tax.

Lawmakers have suggested raising that cap so more high-income earnings are taxed. Expanding it to cover 90% of all wages would close about 20% of Social Security's projected 75-year funding gap.

A larger change, which would apply the payroll tax to earnings above $250,000 without increasing future benefits, would close roughly 70% of the gap.

For most retirees, this would not change anything today because the payroll tax applies to people who are working, not to monthly Social Security benefits.

What raising the retirement age would mean for future retirees

A higher full retirement age would mostly affect people who have not claimed Social Security yet. Current retirees would generally keep the same rules, while younger workers could have to wait longer to receive their full benefit.

Working a few extra years may be realistic for some people, but it is much harder for those in physically demanding jobs. For others, retiring later could mean collecting benefits for fewer years over the course of retirement, even if their monthly check stays the same.

How a slower annual raise would add up over time

Some proposals would change the formula used to calculate Social Security's annual cost-of-living adjustment (COLA). One option would switch from the current CPI-W formula to chained CPI, which has historically produced slightly smaller annual increases. Another would use CPI-E, which could lead to slightly larger ones.

The change in any single year would likely be small, but it would grow over time. Because each year's COLA builds on the last one, even a slightly smaller increase can leave retirees with noticeably less over a long retirement. That is one reason AARP has strongly opposed proposals that would slow future COLAs.

How your check could change even without a new law

Not every change to your Social Security deposit depends on Congress. In some cases, your monthly check can change because of rules that are already in place.

For instance, retirees with higher incomes pay larger Part B premiums through IRMAA. If a larger COLA pushes your income into a higher premium bracket, part of your Social Security increase could be offset by a higher Medicare premium before the money reaches your bank account.

If your income is already close to an IRMAA threshold, it's worth checking how a larger COLA could affect next year's Medicare premium as well as your Social Security benefit.

What to do while Congress works through the options

Congress is still debating its options, and any major changes are unlikely to happen overnight. While that process continues, there are a few practical steps you can take now:

• Create or sign in to your my Social Security account to review your earnings record and benefit estimate.
• If you have not claimed yet, compare different claiming ages carefully, since waiting longer can increase your monthly benefit.
• Keep building savings outside of Social Security when you can, giving your retirement plan more flexibility if the rules change.
• If you want to weigh in, AARP and other advocacy groups offer simple ways to contact your members of Congress about Social Security.

Whatever Congress ultimately decides, having an accurate earnings record and a clear picture of your expected benefits makes it easier to plan for the years ahead.

Bottom line

AARP wants Congress to act while there is still time to strengthen Social Security without cutting the senior benefits retirees have earned. The closer the program gets to the late 2032 funding deadline, the fewer options lawmakers are likely to have.

For now, nothing about your monthly benefit has changed. The details of any solution are still being worked out, giving you time to see how the debate develops and prepare yourself financially.