Social Insecurity

Included with the 2009 Social Security statement is a single page insert titled, “What young workers should know about Social Security and saving.”  Of particular note was one column presented as a single Q&A.  Here’s what it says:

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Will Social Security still be around when I retire?

Yes.  The Social Security taxes you now pay go into the Social Security Trust Funds and are used to pay benefits to current beneficiaries.  The Social Security Board of Trustees now estimates that based on current law, in 2037, the Trust Funds will be depleted.  Because people are living longer and the birth rate is low, the ratio of workers to beneficiaries is falling.  Therefore, the taxes that are paid by workers will not be enough to pay the full benefit amounts scheduled.

However, this does not mean that Social Security benefit payments would disappear.  Even if modifications to the program are not made, there would still be enough funds in 2037 from taxes paid by workers to pay about $760 for every $1,000 in benefits scheduled.

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So, if I’m not misinterpreting what is being said here then this means that unless the system is reformed, those of us in Generation X, Y and beyond can reasonably expect to receive 76% (or less) of what we paid into Social Security during our working years.  That’s a sobering thought.

It also means the figures printed on the statement are misleading.

Maybe this is an issue worth addressing some time in the near future.  My immediate reaction is to place into question the current practice of using incoming monies to pay out existing benefits.  More rational, it would seem, is a system that takes incoming money, sets it aside and treats it like an actual savings account or investment fund.  As the money grows and matures it will be there, all of it (and more) for those who paid into the fund in the first place.  Wouldn’t a reasonable person tend to think this is the way the system should already be structured?

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Published in: on October 26, 2009 at 11:24 am  Leave a Comment  
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