US lawmakers are actually thinking about these 3 painful solutions to ‘fix’ Social Security — here’s the best (and easiest) way to protect yourself

"That's one year earlier than we projected," CBO Director Phillip Swagel said at a meeting held by the Subcommittee on Fiscal Responsibility and Economic Growth (2). Swagel noted that the trust fund for Part A of Medicare will also be exhausted in 2040 — a double threat for older Americans.

When it comes to Social Security, that means if Washington doesn't get its act together by that deadline, all beneficiaries could face an automatic benefit cut by an average of 28% between 2033 and 2036, according to the CBO. Unfortunately, many of the solutions proposed by experts could be just as painful, if not more uncomfortable, than an outright benefit cut.

Here are three solutions for the Social Security funding problem that lawmakers could be considering.

1. Raising the retirement age

As of 2026, the full retirement age (FRA) for anyone born after 1960 is 67 years old, although most workers become eligible for reduced benefits as early as 62, according to the Social Security Administration (SSA) (3).

One of the proposals by the CBO to address the deficit is to raise the FRA to age 70 for anyone born after 1981 (4). But this move would have the same effect as cutting currently scheduled benefits by 20%, according to an analysis by the Center on Budget and Policy Priorities (5). The same analysis also claims the impact on lifetime benefits could be magnified for low-income retirees, as this cohort has a lower life expectancy on average.

Simply put, this move could both keep you working longer and lower the overall payout you receive in retirement.

2. Raising taxes

Hiking taxes is generally unpopular, but it's arguably even more unpopular during an affordability crisis.

Nevertheless, this measure could be a potential solution for the impending Social Security trust fund depletion. Higher payroll taxes would boost revenue for the system and keep it afloat for longer.

Fortunately, there is a way to raise tax revenue without impacting the vast majority of American workers: eliminating the wage cap. Under the current system, the 6.2% payroll tax for Social Security is only applied to the first $184,500 of a worker's earnings, meaning that anything over that amount is not taxed (6). Eliminating this cap so that the payroll tax is collected on all earnings would generate significant revenue for the system.

In fact, The Reformer, an interactive tool developed by the Committee for a Responsible Federal Budget (CRFB), estimates this move alone could close 68% of the funding gap (7). The Peter G. Peterson Foundation's estimate is even higher, at 73% (8).

In other words, you could just tax the rich and save everyone. But this move might not appeal to many Americans who already earn more than $184,500, or those who aspire to.

3. Capping benefits for high earners

Reducing benefits for high-income beneficiaries could also make a sizable difference to the funding gap.

For example, the CRFB has recently proposed the Six Figure Limit, which would cap the maximum amount of benefits a couple could collect at $100,000, or $50,000 for an individual, at the normal retirement age of 67 years (9). According to the CRFB's projections, this limit could close one-fifth of the program's 75-year solvency gap, and it could make up over half of its shortfall by the 75th year of its implementation.

Regardless of which lever Congress pulls, it's likely to impact how much Social Security you can expect over the course of your retirement. Now is the time to start preparing for this.

Protect yourself with a gold IRA

To prepare your nest egg and retirement plan for any eventuality, you may need to closely monitor what lawmakers are considering, speak to an advisor to adapt your plans accordingly and invest in assets that protect your wealth while offsetting any future tax burden.

Many investors consider gold alone a safe haven for their assets, but with platforms like Goldco, you can combine these features with the tax advantages of an IRA.

Opening a gold IRA with their help can allow you to invest in gold and other precious metals while still receiving all the benefits of a traditional IRA.