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Don’t panic over Social Security

By Jennie L. Phipps · Bankrate.com
Monday, June 27, 2011
Posted: 3 pm ET

Before you succumb to the doomsayers, read the recently released Social Security Board of Trustees' 2011 annual report on the financial health of the program.

If it doesn't put you to sleep first, this bipartisan report should calm some of your retirement planning fears about this source of income going away.

The report didn't point out much that was new. Instead, it reiterated that Social Security is a pay-as-you-go system. Today's workers pay for current retirees. The baby boomer bubble has been paying into this system for nearly 50 years. They've built up a sizable trust fund that will keep the system solvent until 2036, when the earliest baby boomers who turned 65 this year will be 90 years old -- or dead. At that point, there still will be sufficient payroll taxes coming in to pay about 77 percent of benefits at the levels that are promised today, even though by current projections there will be fewer workers.

The deficit over the next 75 years, as calculated by Social Security's actuaries, is 2.22 percent of taxable payroll. Based on a salary of $50,000 per year, that means that if workers and employers paid another 1.11 percent of tax on payroll -- an additional $550 each annually -- the retirement shortfall would disappear. But paying more isn't the only solution -- and maybe it's not the best. The least painful for most people might be applying Social Security taxes to incomes that rise above about $107,000 -- without increasing the amount these high earners can get from the program. That is a solution President Barack Obama has endorsed.

You can argue that this isn't fair, but as my mother used to say, life isn't fair.

And you can put the fear out of your head that Social Security is "bankrupt" or "going broke," as some people with an ax to grind keep saying -- over and over -- because it's just not true.

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12 Comments
DKJ
August 17, 2011 at 8:13 am

The people who want to end Social Security don't fear it's demise. They hate government programs on principle. They somehow feel that anarchy would be utopia.

Vote to keep these people out of government, their only desire is to starve needed programs into non-existence.

bill
August 16, 2011 at 12:14 pm

ssi in 1940 approx $36. pop was 138million. 1950 pop was 150 million plus. $76 . 1962 pop was around 185mil bennies were $250 1976 pop was 205mil bennies was around $350. 1990 the population was 260million. 2011 are population around 350million bennies is $1250. full employment is usealy around 5% . todays unemployment at 9% or nay sayiers say more than that. nassa/milltary is needed school public applied knowlege not commursulied education beiing sold like candy. too many chiefs not enough indians. not slave labor . replace the congress with people that have dirt under finger not lawyers or banker. that all folks

DC
August 15, 2011 at 10:33 pm

Socialism at its finest. Have those paying all the extra taxes receive none of the benefits. When will people wake up and realize the need to take some responsibility and pay for what is received? Either tax everyone or increase payments for all. Best option is to cut future payments to what is received. That is permanently sustainable and leads to tax increases on noone. Increasing those taxes will lead to fewer jobs and unnecessary pain in the middle class. How is it fair to add additional taxes that pay nothing later for something like this? Some of us work second jobs to save money that would simply be taxed to pay for those who do not.

doug oneal
August 15, 2011 at 9:13 pm

FEAR fear fear GET RID OF THE PHONEY POLITITIONES THERE GO,S fear

Doc1958
August 15, 2011 at 7:54 pm

I noticed that the only people getting mad about social security are the people that are not on social security.Where were you fiscal conservatives when Bush took a surplus from the Dems and stole so much he basically almost sent the US into a depression...I told all that when the next President after Bush came in office and added up all the mismanaged US money they would see the damage that he and the republitards did.Pres.Obama is a scapegoat for the tea -publicans theivery. Remember though Karma is B****.!!!

George
August 15, 2011 at 7:38 pm

1) Will Social Security generate a gain at least equal to per-capita GDP growth between the first date of tax withholding and the last date of benefits received for every individual? (I seriously doubt it). This is the absolute minimum that anyone expects when paying premiums into a fully-funded, privately administered retirement plan.
2) Will Social Security return at least constant-dollar value of benefits received vs. taxes paid? Maybe and maybe not. If "not" then the system lowers lifetime standard of living.

Yes, you should "panic"!

Robert
June 28, 2011 at 1:55 pm

Well if Frank here says social security is a ponzi scheme then it must be. What she said is baby boomers dying is that they will START to die off and will not longer be collecting social security. But will those remaining alive, they will be funded by current non retired workers. Really?

Mr K
June 28, 2011 at 11:17 am

The majority of Americans alive today retire after 2036. Combined with The astronomicaly rising costs of Medicare, those 40 and under are facing much lower benefits plus huge increases in taxes. Telling people not to "panic" when this is the biggest fiscal crisis facing the upcoming generations of Americans is frankly absurd.

frank
June 27, 2011 at 6:49 pm

Well if Jenny here says everything is ok with social security then it must be. It is a ponzi scheme, the baby boomers are trying to get it to last for them and afterwards when they are dead and there is no money there for your retirement who are you going to get it from.