Social Security and the Impending Depletion of Funds
The debate about Social Security’s depleting fund has been going on for years. Recently, analysts have begun discussing possible solutions to ensure the availability of Social Security for future generations. The Administration’s 2005 trustees report predicted massive annual deficits starting by 2017. This means that by 2017, this Administration will be putting out more money than it’s collecting through taxes. What’s even more troubling is that there’s no definite plan of action to permanently fix this huge problem.
One idea was to increase the payroll taxes by 2% and over a 75 year period, the deficit problem was expected to be resolved. However, the future deficits are growing so large that this modest tax increase will still leave a large shortfall. Social Security’s impending crisis cannot be resolved with this small tax increase.
Another idea, which is supported by President Obama, is to raise SS taxes on people who earn more than $97,500 per year. Currently, those who earn more than this cap amount of $97,500 do not pay Social Security. The Congressional Research Service says that if all earnings were subject to payroll tax, the Social Security trust fund would remain solvent for the next 75 years. Senator Clinton opposed increasing taxes for people earning more than $97,500 because she stated it hurts the middle class. On the other hand, both Presidential hopefuls were strongly against the privatization of Social Security because it leaves the system at the whim of the market.
Former-President Bush has been in support of a plan that allows Americans to invest a portion of their existing Social Security taxes in a personal account. This is sort of semi-privatization. Polls show that there are large numbers of supporters backing this plan.
Out of all the proposed ideas on how to face the impending crisis deficit, no one plan seems to be favored above all the rest and the deficit continues to grow. Hopefully new ideas keep coming forth in order to solve the deficit problem that Social Security will inevitably face.
So far, the Administration has been using special issue bonds from the trust fund to cover its financial problems. But by 2041, that trust fund will run out. At that time, a 26 % reduction in benefits for retirees has been planned.
So, what does all this add up to? Basically, current retirees are in the clear. Their full promised benefits will be paid to them. The Administration has enough money to cover everyone promised benefits until 2017. This even allows for annual cost of living increases.
However, by 2041 the Administration will be in trouble. The trust fund will have run out and so the situation for younger workers looks dire. Anyone born after 1974 will reach retirement age after the trust fund is totally exhausted. At this time, it is estimated that these younger workers will have paid fully into throughout their careers, but will only get 74% of the benefits that have been promised to them.
There is one solution has little to do with politicians and taxes. It involves starting a personal retirement account. When President Franklin D. Roosevelt originally created the Social Security Administration, it was never intended to be the only source of retirement income for anyone. It was established as a supplemental income system. Therefore, younger workers need to think ahead and began looking for other ways to ensure a safe retirement for themselves.
Shaneela Khan is an expert on Social Security Law and has been working in the Field for the past 15 years. For more information on Social Security Benefits please visit: http://www.socialsecuritylaw.com.
Article Source: http://EzineArticles.com/?expert=Shaneela_Khan
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Tags: crisis, financial, obama, politic, polls, report