How would you fix Social Security?

This post comes from Lynn Mucken at MSN Money.

As deficit-cutting fever -- or at least brave talk about it by politicians -- rolls across the nation, one of the top targets of conservatives is Social Security.

Given all the political windage, you might be surprised to learn there is a $2.6 trillion surplus in the SS trust fund. However, with a huge increase in beneficiaries looming as the 1946-to-'64-born baby boomer generation passes through, coupled with a proportional decrease in the working population, the fund is expected to run dry in 2037 and then operate at a deficit for decades longer. Post continues after video.

In his speech this week on the budget deficit, President Obama did not give specifics for addressing that problem, but said "… both parties should work together now to strengthen Social Security for future generations. But we must do it without putting at risk current retirees, the most vulnerable, or people with disabilities; without slashing benefits for future generations; and without subjecting Americans' guaranteed retirement income to the whims of the stock market."

• Calculator: Am I saving enough for retirement?

Just how are Congress and the White House going to do that? We want to hear your suggestions. 

Using information from Boston College's Center for Retirement Research, The Wall Street Journal has laid out 11 changes that could help keep Social Security solvent over the next 75 years. Six of them would change the benefit structure, five would alter the revenue stream. You can riff off them, or give us ideas of your own.

First, some numbers provided by the WSJ and the Social Security Administration:

•  2.9/2.1: Workers for each SS beneficiary today and in 2035.
•  40.7/76.3: Number of Americans, in millions, over 65 today and in 2035.
•  $1,011/$1,312: Today's average monthly benefit for women and men.
•  34 million/$703 billion: Number of Americans receiving SS, and the payout in 2010.
•  52/72: Percentage of retired couples and singles who receive more than 50% of their income from SS.
•  20/41: Percentage who receive more than 90% of their income from SS.

OK, here are Boston College's ideas, and the percentage of the 75-year shortfall each would cover. Feel free to mix and match.

• Cut benefits today by 13% (100%) -- This means the average couple's SS income would drop from $2,323 a month to $2,021. That $302 pays a lot of utility and grocery bills (or greens fees and slot machine play). This is quick and clean, and probably politically fatal for anyone who votes for it. The SS recipients might find it more palatable if the military, federal workers and even members of Congress took the same hit.
• Raise the full retirement age quickly, then in line with longevity (30%): Americans are living longer, and longer in good health. The SS age for full retirement is gradually increasing from the current 66 for those born between 1943 and 1954 to 67 for people born in 1960 or later. A bipartisan committee of retired senators recommended increasing that age to 68 and then to 69 by about 2075. The age for early retirement also would rise from 62 to 64 during the same period.
• Freeze the purchasing power of benefits (100%): SS benefit increases are designed to replace a portion of our earnings, thus helping maintain our standard of living. According to the Boston College figures, if such a freeze had been implemented 30 years ago, today's SS benefits would be 18% smaller.
• Freeze the purchasing power of benefits on a sliding scale (65%): The same as above, but the bottom 30% of the income bracket would continue to replace earnings, and there would be a sliding scale above that. This appears to be means testing by another name. 
• Change the cost-of-living adjustment (25%): Writing on USA Today's Planning to Retire blog, Emily Brandon said that reducing the cost-of-living adjustment by 1 percentage point every year would eliminate 78% of the deficit (40% for half a percentage point). The annual COLA is based on the Consumer Price Index for urban wage earners, and includes food and energy prices.
• Cut benefits in 2037 by 22% (100%): According to Boston College: "The average worker who claims at 65 would get 28% of earnings -- about $11,700 in terms of current wages -- before reductions for Medicare premiums and income taxes. And if we shelter existing beneficiaries, new beneficiaries would get much less." This appears to be a way to punish the current child-producing generation for not having enough kids, but few politicians look 26 years into the future, and this might not cost them their job. And, of course, the "Me Generation" boomers might go for it.
• Increase the payroll tax today (100%): Both employer and employee would put in 7.2% instead of 6.2% on earnings up to $106,800 (sorry, that employee drop to 4.2% negotiated in Congress in December is good only for 2011). If your household is at the median of $67,000, you would pay $670 more a year, or about $13 a week. That just might sell. 
• Raise the payroll tax earnings cap to cover 90% of earnings (40%): According to the Boston College figures, the SS payroll tax covers 83% of all earnings. To get that figure up to 90%, the individual earnings level subject to the tax would rise to $172,000. The well-to-do and companies, both powerful forces in politics, are likely to fight this.
• Use the estate tax (25%): The idea is to take the 35% tax on estates worth over $5 million and dedicate it for Social Security. Given the nation's overall budget deficit, this has a "smoke and mirrors" feel. Are you any richer if you switch your wallet from your left pocket to your right?
• Invest 40% of SS Trust Fund assets in stocks (35%): The $2.6 trillion in the trust fund is now invested in bonds sold to it by the government (yes, we borrow the money from ourselves). Those optimistic Boston College folks think the stock market would yield a 3.5% higher annual return. This seems unlikely to fly, as President George W. Bush learned when he tried to privatize Social Security in 2005.
• Increase the payroll tax in 2037 (100%): Boston College estimated the payroll tax would be 8.2% for both employee and employer, but that seems a trifle optimistic. Still, this might be adopted; the average age for members of Congress is 58, so all but a few would be long gone (from office, at least) when the political backlash hits.

More on MSN Money:

• Want your Social Security early?
• 18 fun facts about SS numbers
• The Social Security Catch-22
• 5 tricks for stretching Social Security
• 5 big money worries for retirees
• 6 ways to get even more Social Security