Millions of seniors today count on Social Security as a major income source, but recipients risk a widespread reduction in benefits if the program's impending financial shortfall isn't addressed. In the coming years, Social Security expects to owe more in scheduled benefits than it collects in revenue. The reasons is that the program's primary revenue source is payroll taxes, but as a growing number of baby boomers exit the workforce and too few replacement workers enter it, Social Security will have a shortfall on its hands. And while the program does have trust funds it can tap to compensate for a lack of revenue, once that money runs dry, which could easily happen within the next 15 years, benefit cuts may be on the table.

Not shockingly, lawmakers are invested in avoiding a massive reduction in benefits, and to facilitate that, different proposals have been floated with the aim to raise added revenue for Social Security or help the program cut its expenses. One popular idea, for example, is raising full retirement age, or the age at which seniors are entitled to collect their full monthly benefit based on their earnings history. While that solution could work in theory, those opposed to it say it's unfair to lower-income seniors who are, statistically speaking, less likely to live longer lives.

Another idea is to raise or eliminate the wage cap that applies to Social Security taxes. Right now, it's only workers' first $137,700 of earnings that get taxed for Social Security purposes, but increasing that threshold, or getting rid of it altogether, would surely drum up more revenue. Unfortunately, that solution is unlikely to sit well with high-wealth individuals who, like it or not, have their share of political pull.

But as radical as these ideas may seem, there's another suggestion in the works that could save Social Security a fair amount of money and help the program avoid insolvency. It's called means testing, and like the aforementioned solutions, it certainly comes with its share of drawbacks.

How does means-testing work?

Means testing is the concept of assessing Social Security beneficiaries' annual income and determining, based on that number, whether they're entitled to a full benefit, a reduced benefit, or perhaps no benefit at all. The idea behind means testing is that benefits would be reserved for seniors who really need them, as opposed to seniors who retire with millions in savings and wouldn't suffer an ounce if those benefits were to be taken away.

By withholding benefits from high-income seniors, Social Security could certainly reap substantial savings. But there's just one problem: It's not exactly fair.

Higher earners today are forced to pay into Social Security with the promise that they'll receive benefits later in life. Among the ultra-wealthy, those benefits may be negligible in the grand scheme of their total retirement income. But at what point do lawmakers draw the line to determine whether a well-to-do senior households "needs" its Social Security income or not?

In other words, what would a reasonable cutoff be? $200,000 in annual income? $300,000? It's certainly possible to argue that seniors with an annual income of many hundreds of thousands of dollars don't need Social Security, but let's not forget that long-term care can cost well over $100,000 a year and bankrupt well-off seniors who wind up needing it longer than the average older American. Is it really just to deprive some people of benefits when they could, one day, wind up on the hook for crippling long-term care costs?

And also, withholding benefits from high-income seniors effectively punishes those people who save responsibly for their later years. Again, it's just not fair.

Will means-testing actually happen?

The concept of means testing actually isn't new. In fact, it's used today to determine whether individuals pursuing personal bankruptcy can qualify for a Chapter 7 liquidation versus a Chapter 13 reorganization. But in the context of Social Security, it's certainly something that's never been tried before, and while the idea might make sense in theory, it will be hard to implement in practice.

The one thing we've always been told about Social Security is that it doesn't discriminate, and that while benefits are based on lifetime earnings, anyone who's accrued enough credits to collect them will indeed receive that money during retirement. To go back on that promise could have severe repercussions that make means testing an unlikely, though possible, solution to Social Security's monetary woes.

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