Change 1: Fix the Social Security trust fund
The most urgent problem is money, because Social Security’s trust fund is expected to run out by 2035. If the trust fund runs dry, benefits would be cut automatically by about 17% for everyone. Such a large cut would be devastating because many retirees already struggle to pay for food, housing, and healthcare.
One proposed fix is to make high earners pay more Social Security tax without increasing their future benefits, according to 24/7 Wall St. Right now, Social Security taxes only apply to income up to a wage cap, which is $176,100 in 2025 and will rise to $184,500 in 2026. Income earned above that limit is not taxed for Social Security purposes, which limits how much money flows into the system.
Taxing some income above the cap, without counting it toward benefits, would bring in more money to support all retirees. Other ideas include raising the full retirement age so people must wait longer for full benefits. Another option is raising Social Security taxes for everyone. Lawmakers could also reduce benefits for some higher-income retirees.
Experts believe Congress will likely use a mix of these options rather than just one solution. Past reforms in the 1980s included taxing some benefits and increasing the full retirement age. Similar tough compromises will be needed again, even though they may be unpopular. Lawmakers are running out of time, because if they do nothing, benefit cuts will happen automatically once the trust fund is empty, according to 24/7 Wall St.
Change 2: Fix the COLA formula
The second big problem is that Social Security benefits are losing buying power over time. Cost-of-Living Adjustments, or COLAs, are meant to protect benefits from inflation. Without COLAs, benefits would shrink in value every year as prices rise. Even though COLAs exist, they have not fully kept up with real-life costs faced by seniors.
COLAs are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), according to 24/7 Wall St. This index tracks spending patterns of working adults, not retirees. Working adults typically spend less on healthcare than seniors do. Healthcare costs rise faster than average inflation, but this is not fully reflected in CPI-W. Because of this mismatch, seniors slowly lose ground even when COLAs are applied. The Senior Citizens League found that Social Security benefits are worth only about $0.80 for every $1 compared to their value in 2010. This loss of buying power is severe and will continue unless the formula is changed. One proposed fix is switching to CPI-E, the Consumer Price Index for the Elderly.
CPI-E better reflects senior spending, especially on healthcare. However, CPI-E is still considered experimental and not officially adopted, as stated by 24/7 Wall St. Lawmakers may resist switching formulas because CPI-E would lead to larger benefit increases. Bigger COLAs are controversial since Social Security already faces funding shortages.
Why both changes matter
Experts say fixing the trust fund alone is not enough if benefits keep losing value. At the same time, improving COLAs will not work unless Social Security has enough money to pay higher benefits. That is why both reforms must happen together. Strengthening the trust fund would protect Social Security’s future.
Updating the COLA formula would help seniors keep up with real living costs, according to 24/7 Wall St. Together, these two changes could make Social Security actually work as intended for the retirees who depend on it most.
FAQs
Q1. Why does Social Security need reform right now?
Social Security needs reform because the trust fund is running low and benefits are losing value due to rising prices.
Q2. What are the two main changes experts say Social Security needs?
Experts say Social Security needs more funding for the trust fund and a better COLA formula that reflects seniors’ real costs.