People rarely think about retirement when they’re young and energetic. Yet it does not free you from the responsibility of paying part of your wages in Social Security. When you get older, you’ll want to be provided for. So let’s talk about your future today.
Can you be sure that the government will pay you back the money that you and your employer pay to it now? As a recent USA Today/CNN/Gallup polls says, half of respondents who are not retired do not believe the Social Security would be able to pay them benefits when they retire. Still, according to government estimates, there will be resources to pay people at least 75 percent of the benefits.
It sounds reassuring, especially since Social Security benefits are not technically guaranteed. The Social Security Act of 1935 states that Congress has “the right to alter, amend, or repeal any provision of this Act,” which has happened before. Yet some people think they are promised retirement benefits.
There are several opinions for Social Security’s current situation. Some people are still optimistic about the system. According to the nonpartisan Congressional Budget Office, Social Security will be able to rely on the trust fund until 2052 and after that will still be able to pay 81 percent of benefits.
Yet Republicans have put Social Security reform back on the national agenda with a proposal to privatize the national system, as they think that the system will be bankrupt by 2042 if not overhauled.
Democrats have pointed to the Congressional budget office’s projection that Social Security is “solvent” until 2052, because that is when the federal budget’s trust funds will be exhausted.
In short, the problem is that Social Security is known to be a pay-as-you-go system, which means the money that you pay now goes to contemporary retirees (plus survivors and disability benefits). When your turn comes, you are supposed to get your benefits from workers’ payments corresponding to your retirement time. But the number of workers to retirees that was 16-to-1 in 1950 will be 2-to-1 within 40 years.
What changes are needed to make Social Security solvent, and when should we make them?
There are two main alternatives of enhancing Social Security. One is by increasing retirement age, and another is raising taxes. Concerning the retirement age, as women are believed to live longer than men, any discussion like that becomes a woman’s issue. That sounds fine for a white-collar worker, but it will not work for more labor-intensive workers.
If you increase taxes, though, in order to bring the system into balance you have to up taxes at least to 14.29 percent and then eventually to 15.9 percent, according to Social Security trustees.
Another suggestion involves privatizing the system, giving younger workers an option to create personal investment accounts and use some of their Social Security taxes to invest in those accounts. This will redirect 4 percent of your taxable wages.
But Americans do not seem to like this idea very much. As Washington Reuters reports, a good majority of American citizens would rather face some changes to Social Security, such as getting less benefits or raising taxable payroll, than create private accounts.
One thing is for certain-without changes, the Social Security trust fund is expected to run dry sooner or later. Time passes very quickly and this issue will pertain to you sooner than you think. Protect your future and speak up now.
Milana Karayanidi is a freshman international business major. She can be reached at [email protected].