Yeah, that's not good.
Social Security might not be the hottest issue being discussed right now, but it is an issue that I feel is really REALLY important for people, especially young people, to pay attention to. And, you know what? We need to sexy it up a little! Buy it a hot little teddy, tell it that it's pretty every now and then, you know...make sure that it becomes something worth caring about, because, ultimately, it can and will have serious long term impacts on every single American citizen.
Disclaimer: when I say "Social Security," I am referring almost exclusively to the benefits for retirement, disability, survivorship, and death, which are the four major areas of payout, and those most commonly found in private-sector pension plans. Other issues that could fall under the larger umbrella of the original Social Security Act include welfare and unemployment benefits, which are a whooooole different ball game, and definitely best left to another blog.
Social Security was implemented in a time very similar to the one we're facing now. The economy was in the crapper, we had a progressive "unifier" as the president, and there were major changes being made the system of government. It was implemented so that the a sector of the population that was particularly financially vulnerable would have a ray of hope during dark times.
Today though, this ray is very visible. Here's the problem: We. Can't. Afford. It.
When Social Security was first implemented -- it was signed into law in 1935, the first lump-sum payments were made in 1937, and the first monthly payments began in 1940 -- the average life expectancy at birth was 62.9 years of age. So basically to collect the monthly benefits provided by Social Security, you had to outlive the expectancy by 2.1 years to be able to collect. That's not a whole lot, and sure, it happened often, but that just means that people weren't collecting for too long before they popped off, too. Now, you can still collect at 65, but the average life expectancy (as of 2005) was 77.8 years! That means that on average, people will be collecting for over 12 years before they start to die off! That's a HUGE difference from the system that worked so well to ensure economic viability to the most vulnerable sector of the population in 1940.
Another interesting fact: In 1940, when the first monthly payments began to arrive, there were about 160 people who were contributing to the fun for every one person drawing out of it. Basically, the Social Security fund was in the black, and it had no reason to believe that it would ever be in danger...it was flush! But then as the life expectancy and population increased hand in hand, we started seeing a little inkling of the problem that now faces us. As of 2005, there were three workers paying in to Social Security for every 1 person receiving benefits.
4 years later we're facing even more of a crisis. The Baby Boomers are rapidly approaching the age at which they can start collecting benefits, and that should make us all very scared. You see, the sheer amount of baby boomers that will move from tax-paying workers to benefit-collecting retirees is enough to completely devastate the ration of 3:1. Estimates say that we will be having 1 worker paying in for ever 2 or 3 beneficiaries! Newsflash, that means that there will be more money going out than coming in. Suze Orman would say that we should stop living beyond our means.
So what, you might say? Well, basically this means that all of the taxes "The Man" takes out of our already meager paychecks as college graduates in entry-level positions is not going into a giant fund, like it used to. Rather it is immediately being sent out across the country to those people who collect benefits. In fact, by 2037 the fund is expected to be officially exhausted. I'll be 50, stil 15 years away from collecting the money I've paid in during my adult life. The only thing that will cover the payouts will be the taxes we are paying in, and that will only cover about 76% of the payouts in 2037. So then, forty years down the road, when we come of age to collect OUR checks, what money do you think will be left for us? Certainly not the same amount as we labored to put in over the years!
Ever heard the old saying, "you reap what you sow"? Well, in the case of Social Security, that's not always true. "That's not fair!" I can hear now, in the refrain so loved by the kids I babysit. You're right. It's NOT fair.
So what are you going to do about it?
That's my point. There needs to be something done about the current Social Security crisis we face in the United States. The program is falling down around our shoulders, but we just keep paying in, hoping that it will just take care of itself by the time it comes for use to collect from it. Doesn't it sound FAIR if we were able to collect exactly what we paid in, not a dime more, not a dime less? Isn't that EXACTLY reaping what you sow? Yes. It is.
And that's what privatization is, bebez. It's taking what you pay in, putting it into an account for you, and then paying you from that account, and that account only, when it comes time for you to retire. And it's good for the government, too! The government would get to take the profits from these investment accounts make investments with them, and keep all of those profits. (Yes, there's a lot more that goes into the process, but do you want this to be a novel? Do your own research, my object is to get you to care.)
So if you want to get out as much as you put in, if you want to have something to retire on, and if you care whether the government will come to a complete financial standstill in the next 40 years, you should really take a closer look at the Social Security situation in the United States. This isn't the sexiest issue out there, but really, do you want to wait until you're ten years from retirement before you discover that there's nothing there for you? Something has to be done, and whether you're for privatization or for more government control (ugh, I hope not), you need to let your elected officials know that this is a pressing issue they need to address now, not later.
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