For a history of old age retirement systems in Europe
and their development in the USA go to:
www.socialsecurity.gov//history/briefhistory3.html
For information about the curent social security system
go to the National Academy of Social Insurance at:www.nasi.org.
(click Reporters Social Security and Medicare Source Book)
Introduction
Social Security is a financial resource for many Americans who are retired,
disabled, or widowed. There will be an attempt to change it in Congress
this coming year(2005) due to perceived problems with the system. The
following frequently asked question format is an attempt to describe
the system- especially as it impacts retirees(much of the same applies
to survivors and the disabled)
.
Isn’t Social Security Going Broke?
No. The system will continue to pay all benefits until 2041- even if
we make no changes and the economy does not grow. The economy’s
growth and higher wages alone will contribute to the funding of Social
Security. Since its inception in the 1930’s modifications have
been made to Social Security in order to respond to changing demographics
and as a result the system remains solvent. There is time to make the
necessary modifications now without making radical changes.
In the Future Won’t a Smaller Work Force be Unable to Provide Benefits
to a Growing Population?
It will be able. Most of us know that our population of elders and therefore
of retirees is growing and with baby boomers will grow even more. Those
who are 18-64 will continue to be a smaller part of the population.
This does seem to be an area of concern. How is it possible that our
nation can afford to support retirees in the Social Security system?
In years past many people(children, disabled, and retirees) depended
on workers and their incomes. The percentage of retirees is rising but
not the others and the total of retirees, disabled, and children who
are dependent on workers and their incomes is going down and is expected
to continue to decrease.
Other possible factors which would contribute to the solvency of the
system include the productivity of workers(this has been growing) and
decisions by those over 65 to continue to work, delay using social security,
and continuing to contribute to the system.
Doesn’t Social Security Provide a Full Income and Investment Savings
Plan?
Social Security has provided a partial insurance plan for retirees.
It has always been developed to supplement other income(employee pension
plans, IRA’s, 401k’s,other savings, etc.). Prior to the implementation
of Social Security many elders fell into poverty. That number has decreased
significantly. This plan is guaranteed by the Federal Government and
while not necessarily high is dependable.
Aren’t Retirees the Only Ones in the Economy to Benefit from Social
Security?
Many others in addition to the 29 million retirees receive direct and
in-direct benefits.
- Adult Children – If their parents’ have a dependable income
they can more easily support their own children.
- Taxpayers – Without Social Security many more seniors would
be dependent on welfare and that would require higher taxes.
- The Economy – Seniors spend this dependable and predictable
source of income during both down periods and growth periods of the
economy.
Even so Won’t Privatization of the System Help Everyone?
No. But, there will be winners and losers. In the current system there
is a shared risk by everyone. With privatization and the development
of individual accounts the risks shift to each individual. This will
depend on the expertise of each individual about the stock market and
also the variability and unpredictability of the market. The skills,
experience, and honesty of individual stock brokers will also be a factor
in the gains or losses of each account. That part of social security
cannot be guaranteed. Further, the system itself may be endangered as
payroll tax dollars are diverted to this new system and thus hurt everyone.
Individuals would also have to pay administrative fees out of their
own accounts(possibly 15-20 %). Significant cuts in benefits may be
required. For those who depend on social security income these cuts
would be devastating.
Others would particularly be at risk:
- On average women have lower incomes, live longer and interrupt their
careers(due to family caregiving). All that reduces their income and
their ability to save/invest for retirement. The social security system
guarantees steady income. Privatization does not.
- People of color are less likely to have other retirement income
or personal savings. Less than one-third of African American seniors
and one-fourth of Latino seniors receive pension benefits. For those
who depend on Social Security as a crucial part of their retirement
income this resource should not be placed at risk.
- It has been promised that younger workers would benefit the most
from privatization. But even for this population there would be problems.
They would have to pay for current beneficiaries especially during
the transition period. No one yet knows how long this would take but
conservative estimates are that it would cost at least one trillion
dollars. Younger workers(our society’s children and grandchildren)
could pay a large chunk of this amount – possibly with higher
taxes.
As this debate proceeds please learn more about how social security
works. Listen to proposals for change carefully. Be wary of how proposals
are marketed and of the language which is used. Pay attention to the
substance of each plan. Maintain contact with your Federal Representative
and Senato