Will Social Security Be Around When You Need It?
The social security system was designed to be self-perpetuating. No one could have foreseen the demographic changes in the future that would eventually threaten the program's existence. Those who are currently drawing benefits from social security are being paid with withholdings from today's workers' wages. This current model is often called a pay-as-you go system. Following World War II, the bump in population known as the Baby Boom has been working its way through the economy. As this crowd came into the work force, their earnings generated more funds than were needed at the time for social security claimants. In the 1980s the Social Security Trust Fund was created to harness these funds so that they would be available when the boomers themselves retire. The Trust Fund has been invested in U.S. Treasury bonds backed by the government and are earning on average 6 percent.
Social security is designed to make payments to you for your entire life. You will not run out. Your benefits will not lose value. Periodically the Social Security Administration adjusts benefit payments to keep up with inflation.
As a social policy, social security is a beautiful thing, as our nation's young and able take care of those who can no longer support themselves. The current kink in the plan, and why statisticians can pinpoint an end in the road for this concept, is that the ratio of workers to beneficiaries will become unbalanced in a few decades. Economists project there will continue to be an excess of social security contributions compared to outflow until somewhere between 2017 and 2020. Interest earned in the Trust Fund, added to current withholdings, is forecast to carry its positive cash status until 2040. At that time, there will no longer be enough workers making contributions to support the number of retirees drawing out benefits.
The good news is that Congress has time to address this coming problem. Among options that could help are:
Raising the income level ceiling for social security withholdings
Adding state and local government new employees to the social security program
Raising the social security tax by ∕ percent each for employees and employers
Raising the age for receiving full benefits
Increasing the number of work years needed to receive maximum benefit
Reducing benefits for new retirees by 5 percent
Reducing payments to higher wage earners
Diversifying Social Security Trust Fund investments
Talk of having workers take responsibility for investing some of their social security wages in private accounts has heated up the philosophical debate about how this program should work.