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Will today's young adults be able to depend on Social Security as a source of retirement income, or is our payroll tax just another form of revenue for the government to spend as it sees fit?
Since 1931, Congress has routinely borrowed the SS surplus to fund what are known as "off budget" programs -- the so called "earmarks." When we speak of the national debt, a significant portion of that are these SS borrowings.
It has been projected by a variety of sources (times, post, etc) that the tipping point when outgo exceeds income may arrive as early as 2011. This presents two distinct problems for Congress. First, they no longer have the surplus to spend for off budget programs, so those will have to either be discontinued (not likely) or be funded "on budget" from tax dollars. The second, related problem, is that SS shortfalls will have to be made up from the general treasury I.e. tax revenues, further reducing the funds available for other programs. Aproximately 80% of the federal budget is "committed" -- think debt service, payments on long term contracts, etc. Everything we perceive as govenment spending comes out of the remaining 20%.
No one is projecting a total collapse of the system, but rather are suggesting that it will only be able to meet roughly 2/3 of what projected benefits will be somewhere around 2034-2042. give or take a few years.
There are really only three variables in the equation: benefits paid, taxes collected, and retirement age. There is no real magic with this. The solution lies in doing something with one or more of these figures. However, the older folks oppose benefit reduction, the pre-retirees (the boomers) oppose delayed retirement, and the young folks oppose tax increases. And all are represented by powerful lobbies.
Republicans favor solutions that involve a small degree of pain spread over a long period of time, Democrats typically oppose that, but really offer no other solution except delay till its the next guy's problem to solve. Presumably they will continue to block reform efforts until it collapses...
As an individual, your best bet is to fully fund any 401-K plan available to you, set up and fund an IRA or Roth IRA, start early and keep with it. These are the defined contribution plans. Forget about defined benefit pension plans, they are all going into the tank.
Absolutely--and most people draw far more out than they ever paid in and that holds true even if they only get 2/3 of what was promised.
SS was never intended to be a means of total support, it was simply a supplement to bridge the gap between ones savings/pension and an ever increasing cost of living.
The problem real problem is one of perception: many people look at it as a total means of support rather than the supplement it is supposed to be. It is a mathematical impossibility for SS to be a total means of support for more than a relatively small portion of our society. There simply isn't enough income to support it.
Not only that, wages in US went out of control in the 90s and became unsustainably high. That's why average income has been trending down since the turn of the millenium and that trend will likely continue for quite some time. Businesses that have been successful maintaining high salaries/benefits have only done so by becoming more efficient, cutting back staffing, closing unprofitable operations, and outsourcing where possible. The problem with that, is that you can only cut back so far and eventually it negatively impacts service quality and that, in turn, drives off customers. The real culprit here are the consumers who simply aren't purchasing American products like they used to do--until that changes, it'll be tough.
Social Security is the only government program I know of that has a surplus. Currently actuarials do predict that SS will exhaust its surplus around the year 2041 at which time they will have to cut benefits by about 22% to stay solvent. In the decades between now and then we can save SS with a little pain now or a lot of pain near the end of the surplus.
One other problem looms. The SS surplus is now the government's piggy bank. They borrow money from SS for various expences. When this surplus is exhausted we will have to finance more of our debt through other nations. This will increase the cost of maintaining our debt and it will make us more at the mercy of other creditor nations like the Middle East and China.
The Social Security trust fund consists 100% of US government debt instruments. in other words, the trust fund is a loan from one branch of the government to another. The taxes taken from you for SS today, are spent today.
In other words, future SS benefits are based on nothing except the ability of the government to tax citizens in the future. If demographics continue as they are today (an aging population), there won't be enough tax revenue to fund everyone, and so they'll offset that by some combination of raising the retirement age, reducing benefits, and raising taxes.
My bet is they'll eventually raise the retirement age and start factoring wealth into SS benefits.
Of course the Social security retirement age has already been increased.
Only people born before 1937 were able to collect full SS retirement benefits on theri 65th birthday. Those born after 1960 have to wait until they turn 67 to collect full SS retirement benefits.
Of course life expectancy has increased more than 2 years in those years so youngsters will still collect SS longer than early participants.
SS benefits used to be rather meagre, not enough to make much of a difference for most retirees. Presidents Johnson and Nixon increased SS benefits to the point where they raised most retirees above the poverty level.
I think to believe that our children won't have Soc. Security is a bit short-sighted. I believe that in the next 10years that well will be dry. As populations expand and SS taxes are skimmed by other administrations, there is barely enough to support the elderly and infirmed that benefit from SS money today. Without an IRA, or 401k started at an early age you could be relying on your children to take the financial burden of your care. I am 33 now, and I doubt I will see a penny of the SS money I have put in for all these years.
It will be there only if we are willing to take on some pain now. An increase in payroll deductions, a decrease in payments/benefits, a raising of the cap on income that is taxed, or a deferral of the onset of payment. Or most likely a combination of all of the above to spread the pain.
And as much as I dislike Bush, all administrations have dug into or weakened Social Security. I do think that some additional sources of retirement income will be needed by people. IRA's, 401(k)'s, savings, etc.
if the rate things are going with the US right now im sorry to say, but no most people will then have to work until 80 or so to make up for the lost money thats all I know though, I could be wrong but seriously, be safe and dont count of social security, the gov is screwing the US over
