The Social Security Issue as Retirement
Instructor Karen Lawler The Social Security Retirement Issue Millions of Americans are concerned about whether or not their years of hard work and contributions into the Social Security fund will be in vain. Social Security was initially established in 1935 as a social insurance effort by the United States Government.
(Social Security,”2010) This effort is funded by contributions from payroll taxes matched by employers known as the Federal Insurance Contributions Act (FICA). Contributions by employees are repeated as benefits in the form of death, retirement, survivorship and death pay.The Social Security program is a credit based system which is used to determine whether or not individuals qualify to collect money. The working class must earn 40 credits in order to qualify to receive Social Security payment which is equivalent to approximately 10 years of work. (“Going Broke,” 2010) Many Americans who have been taxed directly from their earnings worry that they will not be able to retire knowing that they can independently support themselves. This fear, which is harbored in the minds of many employees across the country, is the result of a depleting Social Security fund.The depletion of the fund has been caused by the overpopulated baby boomer generation, individuals choosing to retire early, the claim that it is a Ponzi or Pyramid Scheme, Social Security Number Theft and fraud in the acquisition and use of Benefits among other causes.
The Social Security Issue as Retirement Essay Example
(“Pyramid Scheme,” 2010) In this paper I will further elaborate on the many concerns and issues plaguing the Social Security fund and potential remedies to the necessary benefit. A baby boomer is an individual born post World War II in an era when there was a large production of offspring in the United States of America.The years that coincide with this generation are 1946 to 1964, where approximately seventy six million children were born in America. (“First Wave of Boomers,” 2010) Baby boomers control more than 80% of personal financial wealth and 50% of the spending power in the United States which signifies that they contribute to half of the entire consumer spending in the country. (“First Wave of Boomers, 2010) This large group of people is on the verge of retirement and many of them will be dependent on the Social Security fund to support them.The first wave of baby boomer retirees will seek Social Security benefits beginning as early as this year with an estimated 3. 5 million drawing benefit checks.
The social Security system is set up to allow the contributions of the current work force to pay for the benefit payouts of individuals seeking to retire. A problem arises as the result of the vastness of the soon to be retired 80 million strong baby boomer generation. The benefits they receive will have to be funded by the future payments of even younger workers.Experts estimate that the large baby boomer generation will leave barely two employees paying payroll taxes for every retiree. Brian Riedl who works in conjunction with the Conservative Heritage Foundation shares that “this is the single greatest economic challenge of our era. ” (“Social Security,” 2010) Medicare, which is also a social insurance program similar to Social Security, pays out more benefits than it receives through payroll taxes. Social Security is susceptible to this and will ultimately fail if it ever faces that situation.
The Baby Boomer generation will cause Social Security to rise from 4% to 6% of the nation’s economy whereas Medicare which is already operating in a deficit will rise from 3% to 11%. The Government must make an expedient effort to counteract this fast approaching issue because in 2030, the cost of retirement and disability funds will outpace the Social Security program’s income, and money will have to be drawn from the Social Security Trust Fund thus, leaving the trust fund exhausted by 2041 if the Government does not take a utilitarian stand now.There are also several demographic factors affecting the rate at which the Social Security fund is being exhausted. Some of these demographic factors include the rapid increase in life expectancy. Today a 65 year old man is expected to live another 15 years and thirty years from now this life expectancy will increase another 2 years, this means that Social Security beneficiaries are entitled to receive payments for the entire 15 to 17 years or even more in some cases.The Social Security fund already has the burden of supporting such a large amount of retirees and this burden will increase as the length of benefit payout increases. Another demographic factor that affects the Social security Fund is the quickly falling fertility rate.
In years past families were larger with several offspring whereas in current times families are having an average of 2 children. This is due largely to the great expense associated with raising children. The lowered fertility rate directly affects the amount of new working class entering the workforce and as a result social security contributions decrease.The rapid rise in the elderly portion of the population is another demographic factor affecting the Social Security Fund. As the population ages, the number of retirees will also increase adding even further stress to the endangered Social Security Fund and potentially causing its failure. The pay as you go system is set up where the current workforce pays the benefits received by the current retiree group. This system will only work efficiently if the current population is increasing at a much faster rate that the current retiree population.
The system will fall in the current conditions produced due to the ever decreasing retirement age. Economists suggest that the Social Security Fund become privatized and that a large portion of payroll taxes be set aside in retirement accounts for each individual worker. The Government must partner with private organizations and consultants to ensure that it receives proper advising concerning the present and future state of the Social Security Fund. Some solutions will not be as readily accepted but action is required to ensure the survivability of the fund.Some of the solutions that the government is considering putting into effect include raising the retirement age for receiving full benefits past 67, charging wealthier Social Security beneficiaries more and raising or eliminating the $97,500 wage cap for payroll taxes. (“Social Security,” 2010). Currently, Social Security ensures that 40% of retired Americans age 65 and older are not in a state of poverty.
This will continue to be the case well into the future. The $2. 5 trillion dollar trust fund cannot continue to support future retirees unless the contributions are greater than the benefits paid out.Then and only then will America’s Social Security issue be solved providing assurance, peace of mind, and reliable retirement support to future generations.