Social Security: strengthening-social-security

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Strengthening Social

SecurityA Permanent Fix

http://www.whitehouse.gov/infocus/social-security/



Pay-As-You-Go System

• Social Security is a pay-as-you-go system that leavesworkers with IOUs, not personal accounts.

• As Baby Boomers begin retiring in 2008, there will be

a dramatic rise in retirees who will be living longer.

• In 2017, the system begins paying out more than ittakes in – and in 2041, it will be bankrupt.

• Today's 20-year-olds are promised benefits 40 percenthigher than seniors retiring today.







Why We Must Fix System

Now:• If we wait to reform Social Security until the Trust

Fund is exhausted, benefits must be cut 26 percent orpayroll taxes increased by 35 percent.

• The government has already borrowed $1.7 trillionfrom the Social Security Trust Fund to pay for othergovernment spending. No money has been saved inthe Trust Fund.

• Every year we delay fixing Social Security coststaxpayers an additional $600 billion.



Social Security TaxesHave Been Raised Repeatedly:

And Failed Each Time:• Social Security taxes have been raised 20 times, and

each time has failed to permanently fix the system

• In 1935, payroll taxes were 2% of the first $3000 inearnings

• Today, taxes are 12.4% of the first $90,000 inearnings

• The Social Security tax rate would need to be 16.7percent to meet program costs in 2041, an increase of 35% over the current rate.





What Reform Can Achieve If What Reform Can Achieve If

We Act NowWe Act Now

• No benefit changes for those born before 1950 • Future benefits higher than today's levels after

adjusting for inflation

• Reductions in future elderly poverty

• Greater relative benefits for low-income workers

• Voluntary, inheritable personal accounts

• No tax increases



Progressive Benefit Growth:Progressive Benefit Growth:

Protecting the MostProtecting the MostVulnerableVulnerable• Under a reformed system, low-income workers

would receive benefits that grow faster thaninflation.

• Progressive Benefit Growth would solve 70 percentof the funding problems facing Social Security.

• Today, roughly 2 million retirees who paid into

Social Security their entire working lives retirebelow the poverty line. The President believes if you pay into Social Security your entire life, youwill not retire into poverty.

• Progressive Benefit growth has beneficial effectson low-wa e workers – man whom are widowed or



Voluntary Personal RetirementVoluntary Personal Retirement

AccountsAccounts• Personal Accounts are Voluntary. If a worker prefers not to

have an account, he or she has the option to stay in thetraditional system

• Workers can invest one-third of payroll tax – 4% out of the12.4% – in a personal account which they own and control

• Personal accounts give younger workers a chance to earn abetter return on their money. A young worker who earns anaverage of $35,000 a year could expect to have nearly aquarter of a million dollars saved by retirement

• Personal accounts give workers the opportunity to build anest egg and pass on the funds to their spouse or children

• Personal accounts would be invested in secure bond and

stock funds, including a lifecycle fund to protect workersfrom market changes on the eve of their retirement



Now is the Time to Act

“We have a shared responsibility to fix Social Securityand make the system better, to keep seniors out of poverty and expand ownership for people of everybackground. And when we do, Republicans and

Democrats will be able to stand together and takecredit for doing what is right for our children and ourgrandchildren.” President George W. Bush

April 28, 2005

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Social Security: strengthening-social-security