Persuasive Essay Final Paper
Americans need to plan for retirement so they do not have to rely solely on Social Security income to care for them financially after that point. This year the Social Security Administration is projecting, it will collect less in payroll taxes than it pays out in retirement, disability, and survivor benefits. Even though the government economists are saying that the economy and social security will balance out after the Baby Boom era of retirees passes on.
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The federal government because of shortfalls in revenue, is currently finding money from elsewhere to help pay for social security benefits. People, who have a pension, 401k, or saving funds, do not have to rely solely on social security benefits to live after retirement. In 1935, under President Roosevelt’s administration, the Social Security Act signed into law. Payroll taxes began in 1937 and after a grace period, in which a reserve fund could accumulate, the first monthly benefit checks begun to pay pensioners in 1940.
Individuals, who retired and did not work long enough to pay into the program were could receive one-time “lump-sum” payments for their contributions to the program. The original design of this act was financially to aid the retired after they reach the age of 65, payees who have become disabled, or surviving family members of a deceased payee. Many changes were made to Social Security, even before the first checks where written and have continued to be made to the program.
In 1980, the Social Security Administration made changes that tightened the eligibility requirements to make it harder for people to receive benefits (DeWitt, 2010). More than 54 million people receive benefits from Social Security with an average of $1,076 per month. This number will grow by the millions over the next few years because of the rise of the number of Baby Boomers reaching the age of retirement and starting to collect benefits. After tightening eligibility in 1980, Social Security has built-up a $2. 5 trillion that the government is projecting to run out in 2037.
At that time, the Social Security Administration will only be collecting only enough payroll taxes to pay about 78% of benefits unless Congress acts to change the financial future of this program (CBSNews. 2011). Allen Greenspan was the designer of the plan to rescue Social Security in 1980 and served as Chairman of the Federal Reserve Board from 1987 to 2006. In 1982, referring to the bad economy of the late 1970s, Mr. Greenspan said, “There are only three choices that the government has to balance the Social Security program’s funds.
Raise taxes, lower benefits, or bail out the program by tapping general revenue” (Walsh, para. 23). This was Mr. Greenspan’s suggestion to Congress as possible means for the government to provide Social Security benefits for future pensioners. Mr. Greenspan said in an interview with The New York Times in 2010, that the same three choices exist today but the government has more time to deliberate the problems. This year, Social Security is projecting to collect $45 billion less in payroll taxes than it will pay out for benefits.
This shortfall in funds is the combination of the increase in people collecting benefit payments and the increased number of unemployed Americans in the country not paying into the program. In December 2010, in an attempt to boost the economy, a new one-year tax cut to 4. 2% will increase collection deficit for social security to $130 billion. These lost funds are to be repaid out of general revenue, adding to the national debt. The Federal Government has been borrowing the $2. 5 trillion paid into social security by this generation, to pay for other programs.
The Treasury Department issued bonds to the Social Security Administration promising repayment with interest. The Federal Government is responsible for paying back the bonds to the Social Security Administration. The Treasury Department will have to find money from other sources to pay for Social Security benefits every year that the deficit increases. Wealthy Americans, China, and other countries, are lending the United States the money to pay for the governments programs including Social Security, which than these people or nations also receive Treasury bonds (CBSNews, 2011).
Whether Social Security is still available in the future or not, Americans have to prepare for retirement. Saving for retirement is something that every American should do to ensure that his or her family would have money after stopping work. With the amount of money, continuing to grow that the government is borrowing from other sources to repay Social Security for the trust funds that the Treasury Department was issuing. With Social Security, projecting to payout more than it will receive for this year and an increase in payout deficits for future years to come. Americans should have other forms of income after retirement so that financially they do not have to depend on Social Security.