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I was perusing the Analysis of the 2018 Social Security Trustees’ Report. This report claims "that the Social Security program faces a large and growing funding imbalance that must be addressed promptly to prevent across-the-board benefit cuts or abrupt changes in tax or benefit levels."

I'm not sure what conclusion to draw from this report. It would seem that action will need to be taken by the government to avoid cutting retirement benefits.

As a follow-on to this question, it would seem that effective income tax rates would be the logical way the government would try to fix the deficit?

I'm trying to decide if it's better to contribute pre-tax or post-tax (ROTH) dollars to a retirement plan in light of this report. Basically, will income tax rates increase in the future?

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    These facts are known since the late seventies. Generally, politicians make small fixes and kick the can down the road, hoping the opposition will have to solve them.
    – Aganju
    Nov 15, 2018 at 2:48
  • Yes, @Aganju has hit the nail on the head. You are talking a massive socio-economic issue.
    – Fattie
    Nov 15, 2018 at 3:39

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Basically, will income tax rates increase in the future?

Possibly, but there are many other ways to solve this problem that might not involve increasing income taxes:

  • FICA rates (which are supposed to fund Social Security) could increase, either for the employee, employer, or both.
  • Benefits could be cut, either across the board, or to specific groups (probably based on wealth and/or other retirement income)
  • Social Security could be eliminated or phased out
  • Continue to spend at a deficit and ignore the problem.

So it's certainly logical that tax rates could go up in the future, but I would not base that solely on the current state of Social Security

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  • Don't be so sure that no politician would have the guts to cut Social Security. It has been done before. Perhaps not outright cuts but increasing age availability and using the Chained CPI might be swallowed better. And FWIW, last month the Senate Majority Leader insisted that the deficit increase this year had nothing to do with a lack of revenue or increased spending and instead was due to entitlement and welfare programs, suggesting that entitlements would be up next after the midterm.
    – Bob Baerker
    Nov 14, 2018 at 22:00
  • @BobBaerker What is Chained CPI?
    – random_dsp_guy
    Nov 14, 2018 at 22:18
  • @Steh - The chained CPI is a slower growing consumer price index (CPI) that would provide less generous cost-of-living adjustments (COLAs). It's estimated that if it had been in use since its origin, Social Security benefits would be about 5% lower today. For some info read: investopedia.com/terms/c/chain-linked-cpi.asp
    – Bob Baerker
    Nov 14, 2018 at 22:30

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