Social Security: 10055

8/14/2019 Social Security: 10055

http://slidepdf.com/reader/full/social-security-10055 1/12

The Future OSocial Security

2007



Contacting Social Security

Visit our websiteOur website, www.socialsecurity.gov , is a valuable

resource or inormation about all o Social Security’sprograms. At our website, you also can:

• Apply or certain kinds o benefts;

• Find the address o your local Social Security ofce;

• Request a Social Security Statement or a replace-ment Medicare card; and

• Find copies o our publications.Call our toll-free number

In addition to using our website, you also cancall us toll-ree at 1-800-772-1213. We can answerspecifc questions rom 7 a.m. to 7 p.m., Mondaythrough Friday. We can provide inormation byautomated phone service 24 hours a day. I you

are dea or hard o hearing, you may call our TTYnumber, 1-800-325-0778.

We treat all calls confdentially. We also wantto make sure you receive accurate and courteousservice. That is why we have a second Social Securityrepresentative monitor some telephone calls.

http://www.socialsecurity.gov/

http://www.socialsecurity.gov/



“Social Security is one of the greatest

achievements of the American government,and one of the deepest commitments tothe American people. For more than six decades it has protected our elderly against poverty and assured young people of a moresecure future. It must continue to do this

important work for decades to come.”

President George W. Bush

“The Social Security Administration hasa long and proud reputation of protecting our nation’s most vulnerable populations.

It is part of our obligation to the American public that we must strive to continue the

best possible support for older Americansand people with disabilities and their families in the coming decades.”

Michael J. AstrueCommissioner o Social Security



2

Social Security must changeto meet future challenges

Social Security has been a basic part o American

lie or over 70 years. It provides a base o economicsecurity in today’s society through a valuable packageo retirement, disability and survivors insurance.

About 163 million workers are earning SocialSecurity protection, and about 50 million peoplereceive retirement, survivors and disability beneftsrom Social Security.

The Social Security system is designed so thatthere is a link between how much workers and theiremployers pay into the system over their workingyears and how much they will get in benefts.Basically, high-wage earners receive a higher beneftpayment than low-wage earners. However, the beneft

“ormula” is set up so that lower wage earners will get

a higher percentage o their pre-retirement earnings.Social Security has been changed over time to meetthe needs o the American people. It will need tochange again to meet uture challenges.

Strengthening Social Security to meet changingneeds is important to you … to your parents andgrandparents … to your children and grandchildren.

In the upcoming national debate on Social Securityreorm, it is important that you understand theissues presented in this booklet about the system’slong-range uture.



Social Security has made an enormousdifference in the lives of older Americans

Social Security provides older Americans with a

dependable monthly income with automatic increasestied to increases in the cost o living.

Workers can retire as early as age 62 and get reducedSocial Security benefts. Or they can wait until ullretirement age and receive ull benefts. The ullretirement age is increasing gradually. It will reach 67or people born ater 1959.

More than 9-in-10 retirees now get Social Securitybeneft payments each month. For two-thirds o theelderly, Social Security is their major source o income.For a third o the elderly, Social Security is virtuallytheir only income.

3



4

Social Security is more thana retirement program

Social Security also is “America’s Family Protection

Plan.” Younger workers and their amilies receivevaluable disability and survivors insurance protection.In act, about 1-in-3 Social Security benefciaries is nota retiree.

More than eight million workers and amily mem-bers get disability benefts, and about seven millionpeople get monthly survivors benefts. These benefts

can make a signifcant dierence. For example, a35-year-old worker with expected lietime averageearnings o $40,000 a year and who has a spouse andchildren could get about $1,850 a month rom SocialSecurity i he or she became disabled. I that sameworker were to die, his or her amily could receiveabout $2,400 a month rom Social Security in

survivors benefts.



Social Security provides a foundationon which to build retirement security

A comortable retirement rests on a three-legged

fnancial stool—Social Security, pensions and savings.Today, about hal o all workers are covered under

an employer-sponsored pension, and many peopleare not saving as much as they should. While SocialSecurity replaces about 40 percent o the averageworker’s pre-retirement earnings, most fnancialadvisors say that you will need 70 percent or more

o pre-retirement earnings to live comortably. Evenwith a pension, you will still need to save. I youwill not have a private pension, you will need tosave more—and start saving sooner.

Each year, we mail a Social Security Statement toworkers age 25 and older. This Statement shows yourearnings history and also gives estimates o your

retirement, survivors and disability benefts providedby Social Security. You should use this Statement tohelp you with your uture fnancial planning.

5



6

Changing demographics are drivingneed for changes in Social Security

—2007——2007—

The main reason or Social Security’s long-rangefnancing problem is demographics. We are livinglonger and healthier lives than ever beore. When theSocial Security program was created in 1935, a 65-year-

old American had an average lie expectancy o 121

/2 more years; today, it is almost 18 years and rising.

In addition, 78 million “baby boomers” will beginretiring in 2008, and in about 30 years, there will betwice as many older Americans as there are today.At the same time, the number o workers payinginto Social Security per benefciary will drop rom

3.3 today to about 2.1 in 2032.These demographic changes will severely strainSocial Security fnancing.



Current Social Security systemis unsustainable in the long run

Many people think that the Social Security taxes

they pay are held in interest-bearing accounts ear-marked or their own uture retirement needs. Theact is that Social Security is a pay-as-you-go retire-ment system—the Social Security taxes paid bytoday’s workers and their employers are used to paythe benefts or today’s retirees and other benefciaries.

Social Security is now taking in more money than

it pays out in benefts, and the remaining money goesto the program’s trust unds. There are now large“reserves” in the trust unds, but even this money issmall compared to uture scheduled beneft payments.In 2017 benefts owed will be more than taxes collect-ed, and Social Security will need to begin tapping thetrust unds to pay benefts. The trust unds will be

exhausted in 2041. At that time, Social Security willnot be able to meet all o its beneft obligations i nochanges are made.

2010 2015 2020 2025 2030 2035 2040 2045

0

1,000

2,000

3,000

4,000

5,000

6,000

E n d - o f - Y e a r A s s e t s ( b i l l i o n

c u r r e n t $ )

In 2017 SocialSecurity benefit

payments will beginto exceed Social

Security taxincome.

In 2017 SocialSecurity benefit

payments will beginto exceed Social

Security taxincome.

In 2041 onlyout 75% of ab

benefits could bepaid—unlesschanges are made.

In 2041 onlyab

benefits could bepaid—unlesschanges are made.

THE SOCIAL SECURITY TRUST FUNDWILL BE EXHAUSTED IN 2041

out 75% of

7



8

Choices lie ahead

There are several ways to guarantee that SocialSecurity continues to be there or uture generations.

Each option means difcult trade-os that Americansneed to know about. The sooner the changes are made,the smaller their impact will be.

For example, some people think that benefts shouldbe reduced, or at least their uture growth should beslowed. One way o doing this would be to increase theretirement age or ull Social Security benefts. They

say that Americans are living longer and healthierlives than ever beore and that people are spendingan increasing number o years in retirement. Criticso the proposal to urther raise the retirement age saymost Americans now choose to retire early, and that itwould be hard or some people to work past the currentretirement age because o their health or because theirjobs are just too demanding.

Some people believe that Social Security taxes shouldbe raised so that all uture benefts could be paid. Theywant to increase the current combined payroll tax rate,which is now 12.4 percent. Critics argue that payrolltaxes are already very high, having been raised 20times since the program began, and that many moreworkers already pay more in payroll taxes than they do

in income taxes. And they point out that eventuallySocial Security taxes would have to be raised by about50 percent to pay or all benefts owed.

Other people believe that the uture fnancing prob-lem can be solved without reducing benefts or raisingtaxes. They avor “pre-unding” benefts or youngerworkers by letting them have their own voluntary

Social Security personal savings account. They saythat by investing in stocks and bonds, workers couldreceive higher benefts. Supporters also say personalaccounts would allow workers to leave a “nest egg”to their heirs.





Social Security AdministrationSSA Publication No. 05-10055ICN 462560Unit o Issue - HD (one hundred)May 2007 (Destroy prior editions)

Documents

Social Security: 10055