July 3, 2011
On August 14, 1935, President Franklin D. Roosevelt signed the Social Security Act into law. Creating this new law allows workers, at the age of 65 and older, to receive an income that would continue after retirement. The benefits that each worker receives are based on contributions taken from each paycheck. The payroll contribution taxes finances the payments that retirees received monthly. “The program's finances are based on the relationship between the number of workers paying taxes and the number of retirees receiving benefits,” (SSA, 2011, p. 1). With the high rise in unemployment and the number of Baby ...view middle of the document...
Without meeting the changes, the burden of providing benefits for the new retirees will fall on the next generation.
Because the life expectancy of an individual is longer, the social security system is facing a crisis. In 1935, the average life expectancy of an individual was 12 ½ years more but today that number has been increased to 17 ½ more years.
Social Security has become an important part of life for most senior Americans. Compared to the number of recipients in 1940, which was more than 222,000, there are more than 50 million people living on social security benefits today.
The social security trust fund will run out of money by the time young workers, born after 1970, reach retirement age. If changes are not made to the social security system before the young workers reach retirement, their benefits will be about 75% of the promised benefits. To eliminate this problem, plans are in progress to reduce the dependency on the social security system for survival. Options to invest for retirement with payroll tax contributions will reduce the dependency on the social security system by younger workers.
According to the Social Security Administration, the Baby Boomer generation, people who were born between 1946 and 1964, began to retire in 2008. From 2008 until 2025, more Baby Boomer will reach retirement age. With the increase in the retirement age and the number of retirees along with the decrease in the number of people working, the payroll tax contribution will shrink.
One of the main issues of the Presidential Campaign in 2000 was Social Security Reform that would affect younger workers born in 1950 and later, allowing them the opportunity to invest in an account for their retirement.
President George W. Bush, who was elected as the 43rd president of the United States in 2000 and re-elected in 2004, appointed the “President’s Commission to Strengthen Social Security,” on May 2, 2001, (SSA, 2011, p. 1). The guidelines issued by the president for the Commission were to “preserve the benefits of all current retirees and those nearing retirement, return Social Security to sound financial footing and offer personal savings accounts to younger workers who want them,” (SSA, 2011, p. 1). Critics of President George W Bush’s social security reform stated that the meaning behind this reform is to “privatize and ultimately gut Social Security,” (Koulouris & Medeiros, 2010, p. 1). Some believe that privatization is meant only for certain Americans, mainly the rich, while other middle-class Americans will face poverty by investing in the stock market.
Social Security contributions are not set up in individuals accounts and...