Social Security In The Future Essay, Research Paper

Social Security In the Future? Maybe Not

It was early spring in the year 2048 and my bithday was coming up this

August 26. I would be turning 70 years and retirring. I am not looking forward

to it as much as I thought. My whole life I dreamed of moving to Florida and

living on the beach when I retired. I planned on traveling a lot seeing the

great sites the country has to offer. All of these plans have changed instead

my yougest son is putting an addition on his house so that I could move in. I

am very thankful for what he is doing, but I really don’t want to go. I want my

privacy and I’m sure he wants his too. There is no other choice I worked as

long as I could but I’m just getting to old. We all agree that I am not going

into a nursing especially me. If the government would have told us that they

couldn’t solve the Social Security crisis almost 30 years ago I would have

prepared better. But instead they promised they could save it and the program

would still be aruond when I retired. They obviously lied and now I have

nothing. Moments later I hear music its my alarm clock. It was only a dream its

April 1996 and I’m 18. The article about the Social Security in the paper had

me thinking and I must have a bad dream.

The Presidential election will be coming up this November ?96 and the

question that many of Americans have on their mind is what are you going to

about the Social Security crisis? This question has our nation divided between

generations. The elder people of our nation (ages 50 and up) feel confident that

Social Security will be there for them and that it should be left alone. On the

other hand the Baby Boomers (ages 31-49) and Generation X (ages 18-30) lack this

confidence fearing that they will never receive Social Security, and the money

they put in would be a waste. Many politicians are afraid to touch this issue

because the elder still make a large number of the voting block. Speaking as a

member of Generation X it is our duty to vote for change in Social Security to

ensure we will have something to look forward to when we retire. We can not

wait any longer to defeat this crisis.

The Social Security crisis is the threat of the Social Security system

going bankrupt. Well its more than just a threat its the reality. The common

belief is that Social Security is a saving fund where the government takes a

certain percentage out of our weekly pay. Then that money is put into a savings

fund where it is held until we retire. When we retire the money is returned to

us in monthly checks plus the interest. This is where we are wrong. Social

Security is a pay-as-you-go system where the current workforce pays for the

present retirees, and then when they retire they will depend on the younger

workforce to pay for them and so on and so on. Which is fine when you always

have more workers then retirees. This is the problem the government will face

when the Baby Boomers retire in the year 2010. In 1950 there were 7.2 workers

for each retiree. Today there are 3.2 workers for every retiree, an by the year

2020 there will only be 2.4 or less for each retiree. By the year 2010-2015

Social Security is projected by the government to pay out more money than it

could take in. Since the current Social Security took in a surplus of $60

billion last year with a projected total to be around $5 trillion they will have

enough money to last another 10 years or so. All in all experts expect that

Social Security will have spent every penny it has by the year 2030.

In actuality the bankruptcy will probably happen about ten years sooner.

See there is a catch to their surplus that not to many people know about. The

surplus is put in to government bonds so that government can use that money to

support other programs and to pay of other debts. Also when the government

figures out the national debt they subtract that surplus to make the national

debt look smaller. The problem will come when Social Security needs that

surplus to support its program and the government has to pay of these bonds.

The United States will go further into debt having to severely raise taxes and

drastically cut government programs. Or they won’t pay the their debt and the

American retirees will be out trillions of dollars.

There are also two other contradicting factors that boggle the minds of

almost all Americans. First as we all know the life expectancy of people is

getting larger. In 1940 a man at the age of 65 could expect to live another 13

years; today they could expect to live another 17 years. The government figures

by the year 2000 many people will have collected half as long as they have

worked. The twisted part of the whole thing is that citizens are beginning

retire and collect benefits earlier then ever. More than half of all retirees

begin collecting benefits before they are 65. The average at which people began

collecting went from 68.7 in 1950 to 63.7 in 1991.

The Government has tried to institute new polices and reform old ones,

but they are falling short over the long run. In 1993 the President pushed a

tax that stated 85% of Social Security became taxable income to people with

substantial amount of other retirement savings such as pensions and personal

savings. What they are telling is if you are one the smart people in America

that pre-planned your retirement with other savings and not just Social Security

they can put heavy tax on your Social Security checks. Now you would have to pay

twice once whiled you worked and again when you retire. Its has if you are

being punished for doing the right thing.

Another tactic many government official are trying to push is raising

the payroll tax 2%. The current tax is 12.4%, 6.2% from the employee and 6.2%

from the employer. This would aid us temporarily, but would do nothing to stop

the long term problem. “To maintain the systems solvency, taxes would have to

be increased, or benefits cut, between one-half and 1 percent every 10 years”

(Bosworth 36). If you do the math you will realize by the time Generation X

retires the payroll tax needed to keep Social Security going will have almost

doubled. The higher tax rates will start some sort of recession with people

getting far less out of their pay checks to live on. Anyway who wants pay more

taxes. They would also like to cut many of the benefits that Social Security

offers, but why should we pay more and receive less.

The U.S. government has dug itself into a whole waiting to the last

minute to save Social Security. When by simple demographics years ago would have

showed the same problem. They have to get it out of their heads that Social

Security is such a great system that can be saved. Well it was great a the time,

but as we know times change. The only way to save Social Security is to

completely overhaul it. With the best way to overhaul is by the introduction of

partially privatizing Social Security.

It help bring Chile social security system out of bankruptcy. In 1981

Chile privatized it social security by requiring their workers to put 10% of

their pretax wages in private pension funds. The funds are carefully regulated,

and workers can switch among trust fund managers for better returns or lower

costs. They also receive periodic statements. Upon their retirement they

receive their money to buy annuity. What ever is left can be passed onto their

heirs. If there isn’t enough to provide a descent living the government steps

in guaranteeing a minimum. Now Chile enjoys a high savings rate well over 20% of

their gross domestic product compared to the US’s 3.2%.

The plan has been pushed here heavily in the states by Senator Robert

Kerry of Nebraska (D). The plan would not allow people to drop out of Social

Security completely like some other more radical plans, but to divert a

percentage of their payroll tax into accounts that work like Individual

Retirement Accounts (IRA’s). The Senators plan proposes that 2% of the 12.4%

tax would be taken out and placed in private accounts set up by the government.

The money would be one’s own personal account with compound interest

(Congressional Digest 246). The Institute for Research on Economics of Taxation

(IRET) adds, “that they would not be able to touch that money until they retiree

or become disabled. The money is theirs the government would not be allowed to

touch it. If that person should die the money would be added to their estate”

(Congressional Digest 248).

The Cato Institute (a nonprofit public policy research foundation

founded in 1977 whose publication, conferences, and seminars are designed to

illuminate private sector, voluntary solutions to social and economic problems)

also adds, “that those presently in the workforce would have the option of

remaining in the current Social Security system or switching to the new private

system. Those entering the workforce after the implementation of the new

private system would be required to participate in the new system. Thus the

current system would be eventually phased out” (Congressional Digest 244). The

plan also has guidelines to problems and questions that people have or arrive.

First off people begin to question the safety of the government handling

their own personal money. It a viable question considering our national debt

and the way they spend tax money, but the there is a viable answer. If you let

people drop totally out of Social Security and have their own pension plan there

would be know way for the government to keep track and ensure that people are

saving. Then when these people begin to retire and we find out that many of

them never saved any money and will have no monthly retirement checks we will

have a poverty struck elder class that the government would have to bail out.

In conclusion to ensure that everyone has money set aside for retirement the

government has to control the money.

Another common critique is how much is 2% going to save? It wills save a

lot more than the average person thinks. Currently Social Security takes a

dollar from the worker and gives it directly to the retiree with no growth or

interest. The IRET states, “With compounding interest at a 7% real return, a

dollar saved at age 20 would be worth $16 at age 60 and $32 at the age of 70″

Congressional Digest). That’s more then the current system could ever own up to.

Many critics also wanted to know what would the new system do about

people who earned low wages and wouldn’t have a substantial amount of money set

aside to pay for retirement. The Cato institute proposes a minimum savings

amount, acting as safety net. It would be a number to a similar to the minimum

wage where if the individual doesn’t meet the amount specified to earn a livable

monthly payment the government would supplement the difference to bring the

monthly income up to the correct level. The money would come out of the other

10.4% that people still pay into. They also report considering the rate of

return even someone making minimum wage their entire life would still have

enough to meet the monthly requirement (Congressional Digest 244). Concluding

that the safety net would only support a scarce few. This would also keep our

nations poverty level up.

A questions many Americans have is where do we begin? You begin with all

age groups including people in their forties and fifties. For these people who

are getting close to retirement and wouldn’t have a substantial amount saved up

the government would take the benefits earned from year to date and put them

into a bond. The bound would be put along with the 2% they begin saving. The

money would earn interest together so when these people retire they will be

shore to receive the money they deserve and then some (Investment Company

Institute Congressional Digest 252).

The only problem the plan doesn’t solve is the problem that can’t be

solved. This is how do you support the people already collecting their Social

Security. Social Security will have to use their surplus, but as stated the

government has already used this money. In order for people to get the money

they deserve the government will have to cut their loses and pay back their

bonds. It will severely hurt the budget, but what choose is there. No plan

would have been able to solve this dilemma it would have happened anyway.

What more can you say? The time to change the Social Security system

has come. The program considered by many to the prominent leg of the three

legged retirement stool, along with pensions and personal savings, is growing

week. “?the result for retirees almost certainly will mean that the one leg of

three legged retirement stool is going to get wobblier” (Wechsler 25). The

government is going to have to act now to prepare for the future because if they

wait any longer the leg mine as well just fall off. The government is there for

the people and I’m sure they don’t want the suffering of Generation X retirees

on their conscious. I don’t want this to happen. I would like to work hard in

my life looking forward to luxury of retirement at the end, and as a citizen of

this country I should be given that right. If the system goes bankrupt that

luxury just maybe taken away.

The only way to ensure that Social Security will be around for the young

people of this country is to instate the partially privatization plan. Years

ago it was considered to radical of an idea, but now it seems that there really

no other choice. It’s the only plan that shows some hard facts to support it

goals unlike many of the other plans by Congress or President. You have read

the argument and you now the facts I don’t know how anyone could think otherwise.

It took Chile out of bankruptcy it will do the same for us to. What do have to

lose.