Jonathan Kingsbury asked:


http://www.defendingthetruth.com/articles/4808-proposals-change-social-security-benefits.html

During many elections, we have heard proposals from politicians to alter or change Social Security benefits. In this paper, I’m going to research and analyze these proposals to find out whether or not they would be beneficial to the Social Security fund, how it will affect all of us in the future, and the current beneficiaries who receive Social Security.

“The key problem for Social Security is that, as the population ages, soon there will not be enough people paying Social Security taxes to provide benefits for every retired person.” (Dilulio & Wilson 486). This is why so many politicians have proposed changes to the current system. The people in my generation might not see any benefits when it’s our time to retire. “In 1950, there were 16 workers to support every one beneficiary of Social Security; today, there are only 3.3 workers supporting every Social Security beneficiary.” (White House). If Social Security stays unchanged at this rate, Social Security will be paying out more than it takes in. If we ever reach this stage we will be left with two problems, a lot of people paying into the system now will be cut off of Social Security, or the government will borrow more money to pay the beneficiaries, which will increase the national debt.

“Unless otherwise stated, payment levels apply equally to aged, blind, and disabled persons.” (State assistance programs for SSI recipients, 3) I believe that if the Social Security fund only funded beneficiaries who are aged, we would not have such a low number today of 3.3 workers supporting every Social Security beneficiary. “The Budget Enforcement Act, for example, excluded the receipts and disbursements of Social Security from the President’s budget and the congressional budget resolution. Programs that have been excluded like this are called “off-budget”.” (Collender 12)

Robert M. Ball has proposed a plan to alter Social Security while arguing against President Bush’s proposal of private accounts. One thing that Ball has proposed was, “Gradually raise the cap on earnings covered by Social Security so that once again 90 percent of all such earnings would be taxed and counted for benefits” (Ball 2). I believe the means of using tax to fix Social Security will work in the short run, but not in the long. If we do take this approach, should we gradually raise the cap on earnings covered by Social Security even more in the future when Social Security has gone further into debt? Another proposed change by Ball was, “An estate tax is a highly progressive way of meeting this cost, and dedicating it to Social Security would strengthen the contributory.” (Ball 3) Now an estate tax, or sometimes called a “death tax”, is a tax on a person’s estate depending on how much he or she was worth. Again, I see a problem with this proposal because Ball is suggesting that we use another means of tax to be paid into Social Security. I personally think it’s wrong to even have an estate tax because those who are taxed an estate tax were most likely small business owners. “More than 70% of family businesses do not survive the second generation; 87% do not make it to the third generation.” (Frequently Asked Questions about the “Death Tax”)

During the 2000 elections, President Bush was widely known for his proposals to privatize Social Security. Most of the Democrat’s are against Bush’s proposals to change Social Security, whereas, most Republican’s are for Bush’s proposals to change Social Security. In order to find out whether people would be better off under the current Social Security system or a privatized system, I researched the average returns among the current system and compared them to the average returns under a private investment or “private account”.

Barbara Boxer published a “Social Security to Social Insecurity calculator” (Boxer), that calculates the average return an individual will receive under the current system compared to Bush’s privatization plan. I entered many different salaries and years and at every given circumstance, Bush’s plan resulted in a loss. I found this very disturbing considering the large amounts of research I have done last year on retirement accounts.

Dave Ramsey published a ”Privatizing Social Security calculator” (Ramsey), that calculates the return you could expect depending on the type of fund you choose, your income, and your age. Compared to Barbara Boxer’s calculator, I found this calculator more accurate because you were able to choose a fund that had an average annual return, which is calculated into how much you contribute over a given amount of years. The result from Dave Ramsey’s calculator shows how much you will receive from social security and your private accounts when you retire which resulted in a much higher return than social security.

Last year I took an economics class, which covered a great deal in investing for retirement. Some people who are against Bush’s plan of private accounts state that privatizing social security is too risky for retirement. “For individual investors who have neither the time nor the inclusion to actively monitor a stock or a bong portfolio, mutual funds have an obvious appeal. Just pick a good fund and let the managers do the work for you.” (Groz 105). At the age of 19, I visited Fidelity Investments in Braintree, Massachusetts where I was able to start my own investment portfolio. They showed me many funds that ranged from aggressive growth to conservative growth funds. I then chose a couple of mutual funds that were aggressive growth because I was starting my investing at such a young age. “Many investors draw the inference that they should not invest all their money in a single stock or bond, but rather spread out their investments among a group of securities.” (Groz 106). If private accounts were an option, I would recommend people to diversify their investments into many different funds just to limit risk.

Another benefit from investing in certain types of stocks is the dividends. “Dividends, then, are a dividing up and distribution to shareholders of a portion of the corporation’s earnings.” (Groz 27). With these dividends, you can reinvest them into the stock or fund; “Compounding occurs when you get many (e.g., interest or dividends) from an investment and put it back into the portfolio, letting it grow alongside the original investment.” (Groz 183).

After doing researching and analyzing the proposals offered by many politicians, I feel that privatizing Social Security is not such a bad idea. I feel that privatizing Social Security would give people more control of their money when it comes to saving money for retirement that the government cannot touch. I understand that some people might fear the risks of investing in the stock market, but if someone diversifies and chooses funds that are somewhat conservative, there is a very small risk of having little return. Considering that Social Security today has very little return “Social Security’s inflation-adjusted rate of return is only 1.23 percent for an average household of two 30-year-old earners with children in which each parent made just under $26,000 in 1996.” (Beach), you would be better off putting your money into a savings account earning a return close to 3 percent.

“If someone’s definition of national debt excludes the debt owed to federal entities, they are not accounting for the interest on the debt owed to federal entities.” (Ruoco). Since the government’s national debt has been rising year after year which can be seen on (www.publicdebt.treas.gov/opd/opdhisto4.htm), why should I trust the government with my retirement money? This is why I support the idea of privatizing Social Security, or at least giving the American people the option to invest in private accounts.

Sources

Orr, Doug. “Social Security Q & A: separating fact from fiction.” Dollars & Sense 259 (May-June 2005): 15(6).

State assistance programs for SSI recipients. Baltimore, Md. : The Branch, 2002 Jan

Ball, Robert P (2005). “Fixing Social Security” The Century Foundation. 5/3/2005 JustFacts.com. 1 Sep 2001. 25 Nov. 2005 .

United States. A blueprint for new beginnings : a responsible budget for America’s priorities. Washington, D.C: U.S. G.P.O., 2001.

United States. “U.S. Department of the Treasury, Bureau of the Public Debt.” Historical Debt Outstanding – Annual. 25 Nov. 2005 .

White House. “Strengthening Social Security for Future Generations.” Strengthening Social Security. The White House. 25 Nov. 2005 .



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Shelley Godra asked:


Social Security Myths

Written by Shelley Godra 

            Social Security was created to help finance US citizens after retirement.  A portion of every worker’s paycheck assists in funding the Social Security reserve.  Currently, these paycheck portions are creating a surplus in the reserve because there are more citizens employed than retired.  Some spectators believe that the Social Security fund will not be available to younger US citizens once they decide to retire.  Furthermore, some people believe this future crisis will be created by the retirement of the baby-boomers.

            These statements are not necessarily true.  The Social Security reserve might run out by the time I am ready for retirement; however, the cause cannot entirely be blamed upon the baby-boomers.  There are also several steps that can be taken in order for the Social Security reserve to still be used by my generation. 

            Current statistics show that the Social Security fund, if nothing is changed, will dry up by 2040.  There are several reasons for this dilemma, not just the baby-boomers retiring.  The government is using the funds from Social Security to pay other federal expenditures and budgets.  Thanks to medical advancements, US citizens are living longer and using more of the Social Security funds.  People are putting more emphasis on their careers and putting marriage and family on hold.  Since there are less children being born now, there will be less workers funding my Social Security once I am ready to retire.  The final reason is that more companies are outsourcing their employment positions and less US citizens are offered jobs.  Less offered jobs mean a smaller percentage funding the Social Security reserve.

            Like stated in the previous paragraph, the Social Security fund will run out if nothing is changed.  The first option is to change how Social Security is looked at now and how it will be treated once the baby-boomer generation retires.  Government could increase the age eligibility for retiring since people are living longer or could cease payments once a retiree reaches a certain age limit.  The percentage from the paychecks currently contributing could be increased, therefore, increasing the funds.  The government could be more lenient on its immigration restrictions; more immigrants would help to contribute more to the Social Security reserve.

            Changes in the government are not the only way to avoid this Social Security crisis.  Proper arrangements are needed for my generation in order to retire without dependency on monthly Social Security payments.  Citizens can make alternative retirement plans by investing in 401Ks and IRAs; this way people can take their own risks with their money.  Unfortunately, obesity and unhealthy lifestyles might lower the longevity of some in my generation.

            In conclusion, there is a future problem concerning Social Security, however, the problem is not fully caused by the baby-boomer generation.  Additionally, there are changes that can be made in order to avoid this problem.  Personally, I believe that there will be no government changes and the Social Security will indeed run out by 2040.  I have taken this burden onto myself by creating an alternative retirement plan.  I will be in charge of my retirement.



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Luis R Cardenas asked:


The main idea of the social security program is people welfare. The United States created this program based in what other countries in Europe were doing for its citizens. This program has experimented many changes since its creation in 1935. When this program was signed by President Roosevelt, the idea was to provide retirement income for people 65 or older. Lately the government has made changes on the retirement age and social security income requirements. People in the US are starting to worry about the Social Security funds which they think are getting lower and lower with time. The main question could be: Is there going to be money left when you retire. 

The average Social Security Check a retired person gets is around $1000.00 per month and usually does not replace more than 60% of the income they were making before retirement. The main factor that contributes to set a check figure is the average annual income the retired person was making while he/she was working. If that person was not able to save on a 401k program or any other retirement account before deciding to leave the workforce, he/she will have to considerably lower their living standards to be able to retire. But, it could get worst! 

It is considered by many that if congress does not make a big injection of money to the social security funds soon, money will run out within the next 30 years. In the past few years the Social Security reforms have helped alleviate the problem but, currently, more money is been paid to retirees than what the administration is collecting. In other words, more money is going out than what is coming in. If the social security administration don’t get at least 6 trillion dollars soon, we could expect the fund to run out by the year 2041 and it considers the contribution of tax payers made during that period too. The Social security administration has considered lowering the social security payment in the future. Would you like that? 

Without a doubt we need a Social Security reform soon. But we need to know where the money is going to come from. Congress can not make a good reform if it has not been studied as for its consequences. It is very difficult to consider a tax increase when the economy may not be able to support its impact. The normal citizen may be pushed to avoid paying what for others could be considered fair but some do not have. Our best option at this time could be to start preparing our selves by saving money for retirement through a retirement account or long term investments but not every person will be able to do it. 

We need to make conscience that the Social Security fund may not be enough for everybody to retire unless something is done soon. Due to the actual situation some people are thinking about how to survive the moment but time does not stop and we have to get ready for the future. Our congress needs to start working on a reform and stop thinking about the next election or how to look good in the eyes of the voters. We could be sure that good ideas are welcomed by your congressman because if he/she can not come up with something we may be able to help. Think about it. We may be able to change things.  The point is that we need a reform NOW!



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