Presentation on theme: "Social Security System and the Future Challenges Bricey Kepnes, Neil Klinger, Amanda Lafferty, Marcus Kocik."— Presentation transcript:
Social Security System and the Future Challenges Bricey Kepnes, Neil Klinger, Amanda Lafferty, Marcus Kocik
+ What is Social Security? Social Security is a trust fund that is used to benefit those who: Have already retired Are disabled Are survivors of workers who have died Are dependents of beneficiaries
+ What is Social Security? When you pay the social security tax, the money you pay in is being used now to repay those who have paid into it earlier in their lives. It is NOT a personal account Each persons contribution funds a large trust fund of money to be redistributed later on depending on the amount of lifetime earnings
+ What is Social Security? Higher lifetime earnings Higher social security benefits Each persons contribution funds a large trust fund of money to be redistributed later on depending on the amount of lifetime earnings $$$
+ What is Social Security? Social security works based on a “credit system” similar to college “credits”. For every $1,130 an individual earns, they earn one social security credit (Max: 4 credits per year). In order to “graduate” to the social security system or RETIRE, one must have at least 40 credits (For full benefits you must work until full retirement age). The Credit System
+ Future Challenges of the Social Security System Since Americans are living longer and the baby boomers are starting to collect social security the current social security fund will run out. In addition, the slow-rebound of the economy and high energy prices are leading to a quicker deterioration of the trusts that fund Social Security.
+ Future Challenges of the Social Security System In 1940, when the program began there were 159.4 workers for every retiree. As of 2006, there are 3.3 workers for every person who is receiving benefits. In 2030, it is projected to be a 2 to 1 ratio. (The oldest of the baby boomers retiring and the birth rate declining are the reason for this dramatic drop.
+ When exactly do benefits run out? According to Social Security Board of Trustees that social security funds will run out in 2033. When 2033 hits Treasury Secretary Tim Geithner, said, referring to Social Security. “At that point there will only be enough money to cover about three-fourths (75%) of full benefits.”
+ Future Challenges of the Social Security System Over a 75-year period, the Trust Funds would require additional revenue equivalent to $8.6 trillion in present value dollars to pay all scheduled benefits. Social Security’s disability program, which helps support 11 million Americans, will run through its trust fund in 2016 (4 years!)
+ Future Challenges of the Social Security System Spending on the disability program last year totaled $132 billion, while it took in $106 billion, the trustees said. It had $154 billion left in its trust fund last year. Once that dries up, the report said, incoming revenue will cover only 80 percent of scheduled benefits. To pay 100% of benefits, the combined employer- employee tax rate would have to be raised in 2033 from 12.4% to 16.7%.
+ This would mean increasing the retirement age for full social security benefits. (We now have better technology and healthcare that would make this possible) Con: Most people choose to retire early Benefits Reduced or Future Growth Slowed
+ Solutions to the Social Security Issue This would mean raising Social Security taxes so all benefits could be paid. Con: Payroll tax in 2006 was 12.6 %, the percent to be paid has been increased 20 times since the program began. Con: Most people already pay more in payroll taxes than income taxes. Eventually S.S. would have to be raised by 50% to pay for all benefits owed Raise Social Security Taxes
+ Solutions to the Social Security Issue This means paying the younger workers their “benefits” as soon as their earned. They will have their own Social Securit Savings account. It wont reduce future benefits or increase taxes. It is higher risk for workers, if investments not doing well when a worker is ready to retire then plans would have to be changed. Personal accounts would be expensive to administer. ProsCons "Pre-funding" benefits for younger workers
+ Solutions to the Social Security Issue The governments would invest for the people in stocks and bonds. Higher potential earnings and risks would be shared. Governments should not invest in a private company because it could end up being the largest stockholder of a company and have control of that company. ProsCons Governments Invest and Not Individuals
+ Sources Falot, Brian. "Social Security Fund to Run Out in 2035, Trustees Say." Bloomberg.com. Bloomberg L.P., 2012. Web. 29 Oct. 2012.. Novack, Janet. "Will Social Security Be There For Your Retirement?" Forbes. Forbes Magazine, 23 Apr. 2012. Web. 29 Oct. 2012.. O'Brien, Sharon. "How Does Social Security Work?." Senior Living at About.com. About.com. Web. 30 Oct 2012.. "Scripting Must Be Enabled to Use This Site." Trustees Report on Social Security's Trust Fund. N.p., n.d. Web. 29 Oct. 2012.. "Social Security and Medicare Could Run Out Sooner Than Expected." ABC News. ABC News Network, n.d. Web. 29 Oct. 2012.. "Social Security Fund to Run Out in 2035, Trustees Say." Bloomberg. N.p., n.d. Web. 29 Oct. 2012.. Socialsecurity.gov. 05-10055 ed. N.p., May 2006. Web. 29 Oct. 2012.. United States. Social Security Administration. Understanding The Benefits. Web.. 29 Oct. 2012.
+ Questions 1.What is Social Security? 2.What are some of the problems with the Social Security System? 3.When is Social Security projected to run out? 4.What is one of the proposed solutions to the Social Security System?