Former Social Security Commissioner Says This Is the Only Way to Save Your Benefits

You'll often hear that relying too heavily on Social Security benefits to cover your senior expenses is one of the biggest financial mistakes you can make in retirement. But the latest update from Social Security Trustees highlights how problematic it is to depend on the program too much.

In June, the Social Security Trustees reported that the program's Old-Age and Survivors Insurance Trust Fund (which pays retirement benefits) could be out of money by the fourth quarter of 2032. At that point, Social Security might only have enough incoming payroll tax revenue to cover 78% of scheduled benefits, leading to a potential 22% cut.

There are a number of solutions available to prevent widespread Social Security cuts, but the program's former commissioner says one solution in particular is worth lawmakers pursuing.

Possible solutions to prevent Social Security cuts

The Social Security Trustees' latest report paints a pretty bleak picture. But the good news is that Social Security has faced potential cuts before, and lawmakers have never allowed the program to actually cut benefits.

Similarly, there are solutions lawmakers could implement in the coming years to potentially prevent Social Security cuts. The most commonly floated solutions include:

• Adjusting how benefits are calculated and slowing annual cost-of-living adjustments (COLAs)
• Raising the full retirement age (FRA) or means testing beneficiaries
• Raising the Social Security payroll tax rate
• Lifting the wage cap for Social Security tax purposes

Most solutions come with clear drawbacks

While there are options available for preventing Social Security cuts, the most popular solutions come with different disadvantages. Adjusting the benefits formula and reducing COLAs, for example, could hurt seniors who rely on Social Security for income.

The nonpartisan Senior Citizens League recently reported that between 2016 and 2026, Social Security benefits lost 13.7% of their buying power, largely due to insufficient COLAs. So reducing those raises could set seniors back even more.

Raising FRA, meanwhile, could put some seniors at risk of having to accept reduced benefits. People who work physical jobs may not be able to stay in the labor force a few extra years, so they'd effectively be sentenced to personal cuts even if Social Security does not cut benefits on a whole.

Means testing is a solution that has long been controversial. With means testing, higher-income seniors could have their benefits reduced or taken away. Critics of this approach say it penalizes strong savers.

Raising the payroll tax rate, meanwhile, would burden workers with higher taxes. It would also force companies to incur higher payroll costs, which could have other consequences, like a reduction in workplace benefits. The current Social Security payroll tax rate is 12.4%, split evenly between employers and employees.

Former Social Security commissioner supports lifting the wage cap

One potential solution for preventing Social Security cuts that may work better than others is getting rid of the program's wage cap, which is currently $184,500.

In an interview with The Hill, former Social Security commissioner Martin O'Malley said that higher-income Americans should pay more into the program to prevent widespread benefit cuts. O'Malley argued that only 6% of working Americans get to benefit from the program's wage cap.

Former Labor Secretary Robert Reich backs this proposal, too. He described lifting the wage cap as an "obvious" fix.

Scrapping the cap isn't so simple

At first, getting rid of Social Security's wage cap might seem like the easiest solution for preventing benefit cuts. But it's more complicated than it seems.

Social Security has a maximum benefit it pays each month that's tied to its wage cap. If the wage cap is eliminated, it begs the question of whether Social Security will have to raise its maximum benefit to keep things equitable.

Social Security benefits are based on lifetime earnings. So if higher earners are forced to pay more, logic would dictate that they'd be entitled to larger benefits, which could at least partially negate the financial savings for the program.

The Trump administration acknowledges that Social Security benefit cuts would be a problem. Its position is that cutting waste, fraud, and abuse will help the program's finances.

"We are working to preserve Social Security and Medicare programs and recognize that more work remains to secure benefits for future beneficiaries," Treasury Secretary Scott Bessent said.

Bottom line

Social Security is one of the most important benefits for seniors. And many future retirees could struggle immensely if the program is allowed to cut benefits.

Eliminating the wage cap for Social Security tax purposes could help pump more into the program. And it would likely only affect a small portion of the population. But even that proposal could introduce a world of complications, which is why it's important for lawmakers to prioritize solutions to Social Security cuts in the coming years — before the clock runs out.