On the first day that the Republican-controlled House of Representatives was back in
session, the Republican majority passed a rule restricting the transfer of money from
the Social
Security retirement fund into the Social Security Disability Insurance program.
Some fear that
this will lead to the Social Security Disability trust fund going bankrupt by 2016.
This all may be
a bit unfamiliar and confusing, so lets start by answering the question: what is Social
Security
and how will it affect you in the future?
Social Security is a program first initiated by President Franklin Delano Roosevelt in
1935 and
it was designed as a safety net to support retirees and the elderly.
Before he started the social
security program, care for those people who were too old to work was traditionally provided
by the family members or poorhouses, which, in the wake of the great depression and other
economic factors, was becoming a less viable option.
After the law took effect, monthly paychecks were sent to individuals aged 65 or older
and
no longer working.
At the time, only 1% of people’s income went to social security.
Since then
the percentage that is taxed has gone up.
Now, with some restrictions, 6.2% of an employee’s
income and another 6.2% tax on employers goes towards Social Security.
Also, the age at
which benefits are received has changed.
In 1961, the earliest age at which you could retire and
begin receiving money was reduced to 62.
However, now, as a result of a 1983 amendment,
waiting to retire until age 67 reaps the most benefits.
Subsequent amendments over the years
have also expanded the realm of care to the disabled, dependent children, surviving spouses
and others.
Problems with social security have arisen over the years mainly due to changes in the
population.
In 1935, there were 16 workers for every Social Security recipient in the US; and
now it is closer to a 3 to 1 ratio.
In 1975, it was reported that taxes soon wouldn’t cover Social
Security payments, so the taxes went up, and benefits were reduced.
In 1983, a similar crisis
occurred, and President Reagan formed the Greenspan Commission to study and suggest
solutions to Social Security.
But no real fix was found.
So, what does Social Security look like right now?
Currently, numbers from the government
suggest that most people 65 or older receive Social Security, and that money represents
about
38% of their income.
On average, that’s a good number, but many accountants now urge
people to view social security as supplemental, rather than a primary income.
However, reports
also suggest that half of older married couples and three quarters of unmarried older people
rely
on Social Security for a majority of their income.
Experts say that at the current rate, the Social Security Trust Fund will be bankrupt
by 2033.
But, to be clear, that doesn’t mean millennials won’t get any money from the government.
They
will still get some, they just won’t get all of the benefits that previous generations
experienced.
They’ll get about 77% of original fund estimates.
Unless, of course, a major Social Security
overhaul happens.
Which some people in politics, like Democratic senator Elizabeth Warren
from Massachusetts, are already calling for.
To find out more about our government and how it works check out our video on the Supreme
Court and their potential bias.
Or click on our other video about the jobs report and what that
really says about our economy.
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