3 Competing Plans Could Reshape Social Security - Here's What Each Would Do

Millions of retirees depend on Social Security senior benefits for at least part of their retirement income each month, but the program's future is in jeopardy. With the Social Security trust fund projected to be depleted as early as 2032, Congress is under pressure to identify and implement a solution to preserve the program and avoid benefit reductions. Legislators have proposed numerous plans that could reshape the Social Security program, and these three competing approaches are being debated.

Whether you've already retired or are nearing retirement age, this is an important topic to watch. Here's what you should know about the three competing plans.

The looming deadline of Social Security's insolvency

Congress is feeling the pressure to promptly find solutions for Social Security. According to the Social Security Trustees 2026 report, the Old-Age and Survivors Insurance trust fund may become depleted by the fourth quarter of 2032. That's one quarter earlier than the Trustees' 2025 report projected. If the trust fund becomes depleted, the Social Security program may only be able to pay out 78% of scheduled benefits, resulting in an automatic benefit reduction of about 22%.

Such cuts could have a significant and widespread effect. More than 70 million Americans currently receive Social Security benefits. A 22% cut could lower average monthly benefits from $2,083 to $1,625. According to Center on Budget and Policy Priorities data, Social Security lifts 22 million adults and children above the poverty line; benefit cuts might be devastating to these vulnerable beneficiaries, as well as to retirees living on fixed incomes.

The debate on competing plans to reshape Social Security

During a Senate Finance Committee hearing, Congress discussed how to best reform Social Security and ensure the program's financial stability. Democrats and Republicans have both presented ideas, and these ideas are being debated but are not yet enacted law. One idea is an actual introduced bill, while lawmakers have also floated several other ideas that aren't yet in bill form.

The hearing ended without recommendation of any path forward, but Congress continues to discuss the best way to proceed.

The bipartisan PROMISE Act

Republican Senator Bill Cassidy, Democratic Senator Dick Durbin, and a bipartisan group have introduced the PROMISE Act. The legislation wouldn't raise taxes or cut benefits, but would instead create a process to ensure Congress arrives at a solution for the Social Security program.

The bill would require the Social Security Advisory Board to create a plan to keep Social Security solvent for at least 50 years. Then, it would force Congress to vote on the proposal using expedited rules.

Since Congress hasn't yet taken much action in addressing Social Security, the bill might create that forward motion. However, critics warn that fast-tracking that process might allow Congress to push through benefit cuts or other changes that are ultimately harmful.

Elizabeth Warren's stance to raise or eliminate the payroll tax cap

Senator Elizabeth Warren has been vocal about her idea to eliminate the payroll tax cap to generate more revenue for the program. Under current law, Social Security payroll taxes only apply to the first $184,500 of an individual's annual earnings; any income beyond that cap goes untaxed. That means that high-earners only pay taxes on a portion of their income.

Warren argues that lifting that payroll tax cap could increase revenue without creating any benefit cuts. It would also mean that high earners pay taxes on the same portion of their income, 100%, as low and middle-income individuals, creating a fairer situation.

Bernie Sanders' expansion plan to apply payroll taxes to higher earners

Bernie Sanders' expansion plan is founded on an idea similar to Warren's, but it takes things a step further. Sanders argues that it's reasonable to ask the wealthiest people in America to pay the same percentage of their income into Social Security as everyday workers, including teachers and nurses.

Sanders is pushing to apply Social Security payroll taxes to all income above $250,000, including investment income. Such a move could increase revenue without increasing taxes for lower earners. According to Sanders, 91% of Americans earn less than $250,000 per year, so they would be unaffected by the tax change.

Additional potential solutions

There are several other potential solutions on the table, too. Legislators have proposed ideas such as raising the full retirement age to reduce program spending, modifying cost-of-living-adjustments, increasing payroll taxes, or means-testing benefits and reducing benefits for higher-income retirees.

Bottom line

The final solution may combine several of these ideas. Raising the payroll tax cap alone won't ensure the program's solvency, but it could be a step in the right direction. Most analysts expect a fix to combine higher contributions from top earners with protections for those who are most dependent on Social Security benefits. In an encouraging transition, the central fight among Congress is now over which methods to use, not whether or not to act.

Since Social Security's future is uncertain, consider stress-testing your retirement plan now to see how well it holds up if your benefits were to be reduced.

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