Growing economic uncertainty has raised the importance of Social Security's benefits for middle-class families, but hurt the program's finances at the same time.
The combination of these income trends have made it harder for many lower-income and middle-income families to save on their own. They need to and can rely on Social Security benefits as an important backstop for their families’ financial future.
But the same trends that make Social Security so important for beneficiaries have adversely affected its finances. The increase in income inequality has meant that a growing share of total earnings are no longer subject to taxes. Workers pay payroll taxes only on the first $132,900 in 2019. In 2018, 83.4% of all earnings were subject to payroll taxes, down from 90% in 1983, the year of the last major Social Security reform .
that Social Security will have enough money available to pay full benefits through 2057 in part because they assumed that inflation-adjusted wages would grow by 1.5% each year. Instead, average wage growth has fallen well below that since 2001 .Calculations Based on Social Security Trustees Reports 1983 and 2019
Social Security also receives less income from payroll taxes because higher-income workers are increasingly not paid in wages and salaries, but in stock options and other capital income, which is not subject to taxation.
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