A second potential way to put the Social Security back on track would be to increase the full retirement age (FRA) for younger workers. Increasing the FRA in this way is a form of cut that was first introduced in the 1983 amendments. At that time, FRA was 65. The 1983 amendments phased in an increase to age 67 for those born in 1960 or later.
If this change came to fruition, it would probably occur much as it has in the past for retirement ages, with a bigger penalty for younger people claiming early. A third change would be to increase the earnings cap. Up to about $140,000 (indexed annually) of earned income is taxed for Social Security benefits, increasing each year. If the cap were removed and no other changes were made, the system would be fully solvent.
Part of President Biden’s tax plan would create a “donut hole” where the first $140,000 is taxed for Social Security, and any income over $400,000 is also taxed for Social Security. It remains to be seen whether this proposal will be implemented, but it will receive consideration.
It is important to note that none of these changes represent a benefit cut to those already receiving or close to receiving benefits. For a customized report on your personal best Social Security claiming strategy click HERE.