Today’s financial news is about something that we all know exists, but not a lot of us think about…Entitlement programs, such as Social Security and Medicare.
Today’s article is The forgotten fiscal problem By: Jeanne Sahadi
Brief summary: The release of a yearly report from the individuals who oversee Social Security will likely spark some debate because Social Security has been in financial trouble for a while, and is likely to be in even more trouble in the years to come.
Thanks to the rise in unemployment, currently at 8.9% nationally, the money paid into the Social Security system has fallen. The article states that the “White House budget office estimates that Social Security will take in less in payroll taxes than it must pay out in benefits for 2009 through 2011. And then the system is expected to start running a small cash surplus for a few years before once again taking in fewer taxes than it pays out in benefits”. What does this mean to you? Potentially, a lot, because when social security runs out of money, the government will try to make up the difference somewhere, and that will more likely be higher taxes and not government spending cuts. And while I am on the subject, I would just like to remind everyone that Social Security is not some money that the government is “giving” you. This is money that you pay in out of every paycheck that the goverment is supposed to give you back when you retire.
According to the trustees who oversee the program, it will start to take in less money then it pays out in 2017 and that the trust fund will be tapped out by 2041 (see below)…remember that the government borrowed the surplus of $2.4 trillion that Social Security had a while back. Without any action, 2041 (revised to 2037 in an article published 1 day after this article was released, which you can read here) is the date after which the system can afford to pay out only 78% of benefits promised to the future retirees, otherwise known as the people who paid into Social Security for decades only to be denied all of their money back when they need it. This is a problem people need to know about. A lack of people paying in is something that will cause problems down the road.
One of the reasons sited for the long-term shortfall is that Americans are living longer. The American Academy of Actuaries, a group of people who are experts in evaluating risk, are advising that U.S. lawmakers increase the retirement age for Social Security. This might fix the problem, but unless your benefits increase for every year that they don’t pay your money back, then they are taking advantage of you. Think about it like this: If you retire at 65, and can collect $1500 a month until you are 100 under the current system, then these benefits should increase by at least $250 each month if you are forced to wait until age 70 to start drawing
social security. But that is NOT what they are planning, I assure you.
The article quotes a recent speech the house majority leader, Steny Hoyer gave regarding Social Security. He is quoted as saying “We can bring in more revenues. We can restrain the growth of benefits, particularly for high-income workers, while we strengthen the safety net for lower-income workers. And/or we can raise the retirement age, recognizing our life expectancy is significantly higher. What is missing here is not ideas — we have a lot of ideas — it is the political will.” Now, follow what he says…they can collect more taxes, they can cut back on benefits, especially for high income workers (who, incidentally, paid in MORE Social Security taxes because they earned more…yeah, that’s fair), while increasing benefits for low income workers (which means giving these workers more than they paid in), or raise the retirement age to collect benefits(which I already addressed above).
Overall, I think the article points out a real problem for the citizens of this country. Social Security is not being funded well enough, and those of us paying in now, which pays benefits for those retiring now, are the ones who will suffer in the future when we retire. Let’s hope Social Security will be in the public eye enough to encourage people to make a back up plan, since it’s obvious, we’re going to need it!
