1. Diane Owens Speaker/Consultant Step Up Your Social Security

2. On January 31, 1940, the first monthly retirement check was issued to Ida May Fuller in the amount of $22.54. Miss Fuller started collecting benefits at age 65 and lived to be 100 years old.

3.  3 Part Social Insurance Program ◦ Retirement (at 62 or older) ◦ Disability (at any age) ◦ Survivors of deceased workers  Mandatory Payroll Taxes ◦ Equal part from employer/employee ◦ Covers about 94% of workers/self-employed  Defined Benefits ◦ Progressive formula replaces “lost” earnings ◦ Includes benefits for qualified family

5. 2009 Income: Payroll Tax 82.6% Trust Fund Interest 14.7% Taxation of Benefits 2.7%

6. 2009 Revenue Used for: Benefit Payments 83.7% Increase Trust Funds 15.1% Administrative Expenses ~1%

7.  Short-term solvency guaranteed. ◦ Trust Funds will continue to increase until 2025 and will pay full benefits through 2037.  Long-term solvency still needs to be addressed. ◦ Fewer workers to beneficiaries: 3.2 to 1 now  Will be 2.1 to 1 by 2031; 1.9 to 1 by 2085 ◦ Increased longevity at age 65: Projection for 2060  Average 3 years longer:  Men 20.9 years & Women 23.1 years

8. If no changes are made, beginning in 2037 about 78% of benefits could still be paid from current year revenues. 2015 2025

10. “Choosing the Nation’s Fiscal Future” – Joint Report from NAPA/NRC and Title IV H.R. 4529 “The Roadmap for America’s Future Act of 2010”

11.  Retains Social Insurance structure* No changes to disability or survivors benefits  Outlines 4 options for sustainable solvency: 1.Reduces future rate of growth of benefits with no tax increases 2.Combination: $2 reduction in benefits for each $1 increase in payroll taxes 3.Combination: $1 reduction in benefits for each $2 increase in payroll taxes 4.Increases payroll taxes to fund current law scheduled benefits for future retirees *See Chapter 6 of Report at www.ourfiscalfuture.orgwww.ourfiscalfuture.org

12.  Option 1: Reduce Growth of Future Benefits ◦ Raise Full Retirement Age to 67 in 2012 & index future increases to average life expectancy ◦ Phase-in higher minimum retirement age (now 62) ◦ Reduce Cost of Living raises by ~.3% ◦ Reduce growth in benefit rates for highest 70% of earners while protecting low earners  Effects: ◦ No increase in taxes; benefits grow < real wages ◦ Medium earner benefits would replace 27% of average earnings in 2050 (compared to 40% now).

13.  Option 4: Increase Payroll Taxes ◦ Raise taxable maximum to cover 90% of all earnings  Currently at ~ 84% of earnings ◦ Raise combined tax rate gradually to 14.7% by 2080 ◦ Add 2 nd Tier (progressive) tax on earnings above maximum with no credit toward benefits:  Start at 2% in 2012 and rise to 5.5% in 2060  Effects: ◦ Very high earners would see ~109% payroll tax increase by 2050.  Current law taxes about 1/2 of their earnings

14.  Modifies Benefit Computations in 2018: ◦ Reduce future growth in benefit rates:  Link to CPI instead of National Average Wage ◦ Protect rates of low earners ◦ Raise Full Retirement Age to 67 earlier & index further increases to average life expectancy  Modifies Revenue Provisions by: ◦ Subject total premium cost of employer health plans to payroll tax ◦ Transfer General Tax Revenue to/from Trust Funds as needed to maintain solvency

15.  Establishes voluntary individual accounts: ◦ Allows workers under 55 to transfer part of payroll tax to personal account (PSA)  Estimated 50% participation rate ◦ Offsets Social Security retirement/spousal/survivor benefits based on level of participation ◦ Invests assets in a PSA to be paid out as a life annuity on retirement (or to estate) ◦ Guarantees account balance when annuity begins would at least = contributions plus CPI-W increases (~ 2.8% per year).

16.  Effects: ◦ Requires General Tax Fund transfers to Trust Fund from 2037 through 2056 ◦ Offset by Trust Fund transfers back to General Tax Fund 2063 through 2082 ◦ Eventually PSA offsets would reduce traditional retirement benefits to zero ◦ Effects on financial markets of increased demand for equities/bonds not clear ◦ See http://www.ssa.gov/OACT/solvency/index.htmlhttp://www.ssa.gov/OACT/solvency/index.html

17.  Reduce Cost of Living Adjustments  Change Benefit Computation  Raise FRA to age 67 earlier, then increase to 68 or later  Raise Payroll Tax Rates  Raise Taxable Maximum Earnings Faster  Cover all State & Local Government Employees  Invest Trust Fund in Marketable Securities  Change Taxation of Benefits to match Private Pensions  Transition from Social Insurance program to smaller retirement benefit with voluntary personal account. See www.ssa.gov/OACT/solvency/provisions/index.htmlwww.ssa.gov/OACT/solvency/provisions/index.html