Why young American workers could lose $110,000 in lifetime earnings

Both Republicans and Democrats seem to have embraced an approach to Social Security that avoids necessary structural reforms and instead promises to preserve benefits at unsustainable levels. The Republican Party platform pledged to “not cut one penny from Medicare or Social Security.”

Similarly, the Democratic Party platform rejected any cuts in Social Security benefits and even promised to expand them. While these statements resonate with senior voters, they come at a high cost for younger generations.

Why Americans may have to pay more for Social security?

American workers may need to pay an additional $110,000 in tax to keep Social Security solvent over the next 75 years, Newsweek reported citing researchers. Social Security forms the backbone of financial security for tens of millions of Americans, with the Social Security Administration (SSA) distributing monthly checks to some 70 million people. But experts have raised alarms that SSA is facing a funding crisis projected to hit as early as 2030s.


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Americans might witness a significant increase in tax for maintaining benefits at current levels while keeping Social Security trust funds financially stable, the Cato Institute, a libertarian think tank based in Washington DC has found. Under the current payroll tax rate of 12.4 percent, a median worker entering the workforce in 2025 is projected to pay approximately $374,133 in Social Security taxes over a 45-year career.

However, if Congress were to increase taxes to ensure the program remains solvent for the next 75 years, the rate would need to increase to 16.05 percent, as cited in the Trustee's report. That would boost the total lifetime tax burden to around $484,261—an increase of more than $110,000.

To make Social Security permanently solvent, the required tax rate would rise even higher to 17.6 percent, pushing the lifetime burden to roughly $531,028, or nearly $157,000 more than under current law.

The Cato Institute, in its report: "The bottom line is that promises to keep Social Security benefits exactly as currently legislated are immensely expensive for younger workers, whether Congress tries to levy additional taxes on all workers or only on those with earnings above the payroll tax cap.

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"Social Security reform is coming. The real question is how this generation will balance the promise to keep seniors out of poverty in old age with keeping the American dream alive for younger generations."

Senators Tim Kaine and Bill Cassidy, in a July 9 opinion piece for The Washington Post: "There is a nationwide appetite to implement a bipartisan, commonsense plan like ours. Waiting until the Social Security Trust Fund is on the eve of crisis would have difficult and preventable consequences. Congress should seize the moment."

Social Security funding

Two trust funds help pay benefits to Americans: the Old-Age and Survivors Insurance (OASI) Trust Fund, which pays for retirement, spousal and survivor benefits, and the Disability Insurance (DI) Trust Fund, which endows programs like Supplemental Security Income (SSI) for disabled Americans.

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Social Security benefits are primarily funded through payroll taxes, income taxes on benefits, and interest earned on trust-fund reserves. Currently, employees and employers each contribute 6.2% of wages—up to an annual income limit of $176,100—while self-employed individuals pay the full 12.4%.

According to the latest report from the Social Security Trustees, these combined funding sources are projected to be depleted by 2034. However, this wouldn’t mean the end of the program. Instead, benefits would be funded solely through incoming payroll taxes, which would only cover about 79% of scheduled payments—resulting in an automatic 21% cut unless Congress intervenes. Congress is yet to take a call on the funding options proposed for Social Security.