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The U.S spends approximately $870 billion on Social Security annually. Roughly 19% of Americans receive benefits, and for over 20 million people these benefits prevent them from dropping below the poverty line. It is one of the largest and most relied upon government programs in the U.S. and frequent stories of it’s impending, or eventual, demise receive a lot of media attention.
Though Social Security is mostly associated with retirement benefits it also provides benefits for disabled workers and their families, and survivors of deceased workers. It is financed by payroll taxes under the Federal Insurance Contributions Act (FICA) and Self-Employment Contributions Act (SECA). When a person becomes eligible they can collect benefits based on what was paid into the program. The program began in 1935 under President Franklin D. Roosevelt and was created to ensure that those who are retired or disabled have some income to rely on even if they weren’t able to save or invest. Though it carries less risk than many personal retirement plans Social Security also has smaller returns than a lot of other options.
There is widespread agreement that financial security in retirement is incredibly important for individuals, families, and the country as a whole. There is also general consensus that ensuring seniors and disabled persons have adequate resources is a matter of national importance. However, there is much disagreement about whether or not Social Security is the appropriate way to accomplish those goals. Detractors point out that if contributions fall below the amount of benefits being paid out, the program will collapse. Another problem is that benefits are not always enough to live on. Some recipients get less than $1000 a month and often need help from other government services, family, and/or non-profits to survive. Supporters of Social Security, including many Democrats, say that the answers to these problems are to strengthen and expand the program. On the other hand, the Republican Party platform calls for a complete overhaul with less government involvement, which gives workers more control over their retirement planning.
Retirement planning, whether done by individuals or as part of a Social Security, is a challenging and long-term process. More than 50% of people retire earlier than they planned, retirement age is 67, and the average life expectancy now over 75. There is an urgent need to ensure we have functional plans and resources to care for retired and disabled Americans. The Annual Report provided by the trustees of Social Security indicates that the program is financially solvent, and will remain so at least until young workers contributing today are able to collect benefits themselves. However, it’s important to keep in mind that those born from the late 1940s to the early 1960's make up about 20% of the U.S. population and more of them retire each year. Meanwhile the smaller younger generations are contending with job and financial markets still recovering from the 2008 financial crash. So, while Social Security seems to be working for now, it’s possible the numbers will shift to a point where it’s future is not guaranteed.