ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

The Past, Present, and Future of Social Security: Will it Run Out?

Updated on November 30, 2014
Source
Source

Social Security Funding

In 2011, it was reported that the Social Security program is the largest expenditures for the United States taking up $700B out of the government’s estimated $4 trillion budget. Social Security accounts for 37% of the government's total budget. In 2011, the Social Security Administration paid nearly 60 million people. Nearly 40% of individuals are dependent upon this benefit for 90% or more of their income during retirement, which means this benefit keeps many people out of poverty.

In 1935, President Roosevelt’s administration signed the Social Security Act into law. The intent of the law was to create a safety net for American workers and their families in the event they became disabled, retired, or passed away. Under this system, workers contribute a portion of their salary to financially protect themselves in the event that one of the above situations occurred. Although, there is good intent behind this program, it has become one of the major topics of conversation in the United States.

Source

How it Works?

Social Security is primarily funded through individuals’ payroll deductions. When individuals are employed, then the individual is able to pay into social security. Deductions are taken and one of those deductions is the Federal Insurance Contributions Act (FICA) tax, which is withheld from each paycheck. Those taxes are held in an interest bearing account known as security trust funds. The government owns these accounts, so these accounts are usually low interest, but are considered to provide better protection compared to private stocks. Individuals are entitled to receive this benefit in a monthly check once he or she retires. The amount received is dependent on how much an individual contributes to the account during his or her lifetime.


Source

Sustainment Challenges

There is some concern with the future direction of this program. The main reason for the concern includes the ratio of those receiving the benefit to those contributing has changed drastically over the years. In 1940, the ratio was 159.1 contributing to 1 receiving social security. Since the Baby Boomer generation to today’s Generation Y the number of individuals has drastically declined due to people living longer and collecting more social security benefits. In the 1940s, the life expectancy was estimated to be in the early 60s for men and women. Today’s life expectancy is in the late 70s for men and early 80s for women. Basically, social security is taking more money out than what is being out back in the pot.

Research shows that by 2030 the ratio will be 2:1. There are nearly twice as many older Americans, which puts the program at major risk. The social security trust fund will not be in surplus, but will go into the red. Most people agree that social security is not sustainable without some type of reform. There have been several proposals on social security reform, but none of the plans have come to fruition.

The Way Ahead

One of the proposals is to privatize social security. The purpose of privatizing social security is to allow for individuals to have control over their retirement funds and prevent financial shortfalls. In theory, if individuals have control over their own money, then he or she is able to invest in the stock market and have the potential to earn a higher return on investment compared to investing in traditional government funds. However, one could argue that although the return on investment is higher by investing in stocks, it is also is very risky. Individuals have the potential to lose some or all of their savings by investing in a higher risk stock.

Although, there is no clear answer to the future of social security, there is a clear answer that something needs to happen to improve the program. Without reform, there may be a major impact on the program itself and retirees. The program itself can face major cuts, increase in tax contributions, or increase in the retirement age. If this happens, there may be a serious impact on low-income workers. This will leave low-income workers worse off and may require for the government to provide other financial support (e.g., welfare). By not taking on this problem, this can serve as a catalyst to break this country's economic stability.

Source

Estimate Your Benefits

Will you have enough money to retire? Do know what your social security benefits will look like when you retire? If not, it is pretty easy to calculate your social security benefits. The Social Security Administration provides a Retirement Estimator that gives estimates based on your actual Social Security earnings records. Keep in mind, it is an estimate and you won't know what you are actually entitled to until you apply for benefits at Social Security Administration. You should not solely depend on social security to financially support yourself; instead you should figure out how much money you will need from other funding sources to live comfortably when you retire.

Do you believe the Social Security program is in jeopardy?

See results

Comments

    0 of 8192 characters used
    Post Comment

    No comments yet.

    working

    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, hubpages.com uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: https://hubpages.com/privacy-policy#gdpr

    Show Details
    Necessary
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the googleapis.com or gstatic.com domains, for performance and efficiency reasons. (Privacy Policy)
    Features
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Marketing
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Statistics
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)