Raising the retirement age and means-testing are both vital to effective reform.
Greszler ’19 [Rachel, Robert E. Moft, and Nina Owcharenko Schaefer; May 20; Senior Research Fellow in the Grover M. Hermann Center for the Federal Budget, Senior Economist on the staff of the Joint Economic Committee of the Congress, M.A.’s in both Economics and Public Policy from Georgetown, and B.A. in Economics from the University of Mary Washington; PhD; Chapter 2 in Blueprint for Balance, “Social Security and Health Care Entitlement Reform,” https://www.heritage.org/blueprint-balance/policy-agenda/social-security-and-health-care-entitlement-reform]
Proposed Social Security Reforms. Social Security’s deficits are enormous, but policymakers have many reasonable options available to them that, if adopted, would reduce its costs and burdens and improve its value. Those options, along with their associated savings as estimated by The Heritage Foundation’s Social Security Model, include the following: Increase Social Security’s retirement age and index it to life expectancy so that Social Security’s benefits would automatically adjust to reflect individuals’ longer life spans and additional work capacity.12 This would save $32 billion over 10 years and reduce Social Security’s 75-year shortfall by 29 percent. Shift toward a flat antipoverty benefit so that the program could better align its resources with individuals’ needs and help to prevent more elderly people from living in poverty.13 This would save $645 billion over 10 years and reduce Social Security’s 75-year shortfall by 84 percent. Modernize the program’s spousal benefit to account for the fact that most women earn Social Security benefits based on their own work history. This would save $2 billion over 10 years and reduce Social Security’s 75-year shortfall by 3 percent. Use the chained consumer price index (CPI) for Social Security’s benefit calculations to provide a better adjustment for inflation. This would save $12 billion over 10 years and reduce Social Security’s 75-year shortfall by 11 percent. Reduce the payroll tax to give workers more choice in deciding how to spend or save their earnings. Savings. Collectively, these changes would reduce Social Security’s costs by $681 billion over the next 10 years and cover 126 percent of its 75-year financial shortfall.14 In the long run, these changes would make it possible for Social Security’s payroll tax rate to be reduced by 14.2 percent, from 10.6 percent to 9.1 percent. Social Security Reform: Benefits for Workers and Retirees. These changes would not just solve Social Security’s financial shortfalls, however. They would also make workers and retirees better off. By targeting Social Security’s resources to those with the greatest need, the program would eventually require less of workers’ paychecks. This would enhance the ability of Americans to meet their financial needs throughout their lifetimes, accumulate significantly greater personal savings, and decide for themselves how best to use their own money.